Trump Abruptly Dismisses Lisa Cook from Fed Board
Concerns Grow Over Central Bank Independence
US Dollar and 30-Year Treasury Prices Decline
Focus Shifts to Nvidia Earnings on the 27th and PCE Inflation Data on the 29th
The three major indices on the New York Stock Exchange were trading slightly lower on August 26 (local time). Investor sentiment appeared somewhat subdued after US President Donald Trump abruptly dismissed Lisa Cook, a member of the US Federal Reserve Board. Concerns over the erosion of central bank independence led to a weaker dollar and a decline in the price of ultra-long-term US Treasury bonds (30-year bonds).
US President Donald Trump (right) and Lisa Cook, Member of the US Federal Reserve Board (Fed) AFP Yonhap News Photo by AFP
As of 9:47 a.m. on the New York Stock Exchange, the blue-chip Dow Jones Industrial Average was down 13.5 points (0.03%) at 45,268.97 compared to the previous session. The large-cap S&P 500 Index had dropped 5.86 points (0.09%) to 6,433.46, while the tech-heavy Nasdaq Index was down 41.073 points (0.19%) at 21,408.219.
President Trump publicly released a letter announcing Cook's dismissal on his own social media platform, Truth Social, the previous day. This marks the first time in the 112-year history of the Federal Reserve that a board member has been dismissed. President Trump cited allegations of mortgage fraud, claiming, "She cannot be trusted due to deceptive and potentially criminal behavior related to financial matters." In response, Cook argued, "There are neither legal grounds nor authority for my dismissal. I will not resign." She indicated her intention to file for an injunction in court to halt the dismissal order.
As President Trump, who has consistently demanded interest rate cuts, openly moved to restructure the Federal Reserve, caution spread through the market. As a result, both the dollar and the price of ultra-long-term Treasury bonds, which reflect long-term confidence in the US economy, declined. The dollar index, which measures the value of the dollar against the currencies of six major countries, was down 0.19% from the previous day at 98.135. The yield on 30-year US Treasury bonds, which moves inversely to price, rose by 2 basis points (1bp = 0.01 percentage point) to 4.91%. In contrast, the yield on the 2-year US Treasury bond, which is sensitive to monetary policy and could be influenced by a potential shift in the Federal Reserve toward more dovish members, fell by 3 basis points to 3.69% compared to the previous day.
Russ Mould, investment director at AJ Bell, commented, "Bond investors are displeased with President Trump's continued interference in the Federal Reserve and the threat to its independence. The move to oust Board Member Cook will reinforce expectations that the US president will replace her with someone more aligned with his own views."
The market's attention is now focused on the July Personal Consumption Expenditures (PCE) Price Index, which will be released by the US Department of Commerce on August 29. The indicator is drawing particular attention as it comes right after Federal Reserve Chair Jerome Powell hinted at the possibility of a rate cut in his cautious speech at the Jackson Hole Symposium on August 22. The July core PCE Price Index, which excludes food and energy, is expected to rise 2.9% year-on-year, up from 2.8% in June, marking the highest level in five months. While the likelihood of a rate cut in September is high, there is still debate about the total extent of rate cuts for the rest of the year, and whether the inflation data meets expectations will be a key factor.
The earnings announcement by artificial intelligence (AI) superstar Nvidia on August 27 is also a major focus. On August 28, Dell and Marvell will release their earnings results.
Adam Crisafulli, founder of Vital Knowledge, said, "For now, the market is likely to quickly move past the news about Board Member Cook and shift its focus to Nvidia's earnings, the PCE inflation data, and employment figures." However, he warned, "The independence of the Federal Reserve is undeniably being undermined, and this process will have negative consequences in the long run."
By stock, Eli Lilly is up 4.59% on news that the company has succeeded in clinical trials for its obesity treatment, drawing in buyers. AMD is up 1.87% after Truist upgraded its investment rating from 'hold' to 'buy.' EchoStar has soared 77.42% on news that AT&T will purchase certain spectrum licenses for $23 billion.
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