[New York Stock Market] Indices Rise Despite Powell Investigation News... Dow and S&P Hit Record Highs

Stocks Rebound After Early Drop on Powell Criminal Charge Concerns
Wall Street Expects Administration to Seek an Exit to Ease Tensions
Alphabet Surpasses $4 Trillion Market Cap, Becomes Fourth in History

All three major indexes on the New York Stock Exchange closed higher on January 12 (local time). Although stocks fell early in the session following news that Jerome Powell, Chair of the Federal Reserve (Fed), was facing possible criminal charges, the market rebounded as investors gradually shook off concerns over threats to central bank independence. Google’s parent company, Alphabet, surpassed a market capitalization of 4 trillion dollars for the first time.

On the 12th (local time), traders are working on the trading floor of the New York Stock Exchange (NYSE) in the United States. Photo by AFP Yonhap News

On this day, the Dow Jones Industrial Average, which is focused on blue-chip stocks, closed at 49,590.1, up 86.13 points (0.17%) from the previous trading day. The S&P 500, which is centered on large-cap stocks, ended the session at 6,977.27, up 10.99 points (0.16%). Both indexes set new all-time highs. The tech-heavy Nasdaq Composite rose 62.558 points (0.26%) to close at 23,733.904.

Stocks declined early in the session after reports that the U.S. Attorney’s Office in Washington, D.C. had launched an investigation into Chair Powell for alleged perjury before Congress. Concerns grew that central bank independence could be undermined, leading to sharply weakened investor sentiment. There were also early signs of a so-called "Sell America" trend, with both the dollar and long-term Treasury prices falling.

However, investors later assessed that the impact of the issue would be limited and resumed buying, pushing the market upward.

Krishna Guha, Vice Chairman of Evercore ISI, analyzed, "This is a very significant issue, but investors believe that the investigation will ultimately lead nowhere, and that the administration will seek an exit strategy to ease tensions."

Chair Powell stated in a release the previous day that the Fed had received a subpoena from the Department of Justice on January 9 and that he had been notified of possible criminal charges related to his testimony before the Senate Banking Committee last June regarding the Fed headquarters remodeling. President Donald Trump has publicly criticized Chair Powell, claiming that the Fed headquarters remodeling costs are excessive. In both political and financial circles, the prevailing interpretation is that this investigation is intended to pressure Powell for not complying with demands for interest rate cuts.

In his statement, Chair Powell emphasized, "This issue determines whether the Fed can continue to set interest rates based on evidence and economic conditions, or whether monetary policy will be dictated by political pressure or intimidation."

Former heads of monetary and financial authorities also publicly criticized the Trump administration. In a joint statement, they said, "Reports of a criminal investigation into Chair Powell represent an unprecedented attempt to use prosecutorial power to undermine central bank independence. This is a decision-making approach to monetary policy seen in emerging economies with weak institutional foundations, which has resulted in severe negative consequences for inflation and the overall functioning of the economy."

The market is closely watching both the direction of the Powell investigation and key economic indicators that could influence the Fed’s monetary policy decisions. On January 13, the December Consumer Price Index (CPI) will be released, followed by retail sales and the Producer Price Index (PPI) on January 14. The Fed has cut its benchmark interest rate three times in a row by a total of 0.75 percentage points since September last year in response to signs of a slowing labor market, but expectations are high that the rate will be held steady this month. Meanwhile, President Trump continues to push for the benchmark rate to be lowered to around 1% per year.

This week also marks the official start of earnings season, beginning with financial stocks. JPMorgan Chase, Bank of America, Morgan Stanley, and Goldman Sachs are all set to announce their quarterly results.

The value of the dollar is weakening. The dollar index, which measures the value of the dollar against the currencies of six major countries, is down 0.23% from the previous trading day at 98.67.

Government bond yields are showing slight gains. The yield on the 10-year U.S. Treasury, the global benchmark for bond yields, is up 1 basis point (1bp = 0.01 percentage point) from the previous day at 4.18%. The yield on the 2-year Treasury, which is sensitive to monetary policy, is hovering at 3.54%, unchanged from the previous day.

Gold prices are strong. Gold futures are trading at $4,603 per ounce, up 2.27% from the previous day.

By stock, Alphabet rose 1.09%, surpassing a market capitalization of 4 trillion dollars for the first time. This was attributed to Apple’s decision to integrate Google’s generative AI model Gemini into its own artificial intelligence (AI) services. Alphabet thus became the fourth company in history to join the "4 Trillion Dollar Club," following Nvidia, Microsoft, and Apple. Walmart rose 3% on news of its inclusion in the Nasdaq Composite, and Palantir gained 1.08% after Citigroup raised its investment rating. In contrast, financial stocks were generally weak after President Trump proposed capping credit card interest rates at 10% for one year. Citigroup fell 2.97%, while JPMorgan Chase and Bank of America dropped 1.44% and 1.09%, respectively. Capital One plunged 6.4%.