Markets slip as Trump’s DOJ targets Powell, triggering rare response from the Fed
Stock futures fell sharply Monday morning after President Donald Trump’s Department of Justice opened a criminal investigation into Federal Reserve Chair Jerome Powell, a direct effort to break the Fed’s independence and pressure it ahead of the January 28 policy meeting.
Dow futures dropped 199 points, while S&P 500 futures slid 0.5% and Nasdaq-100 futures fell 0.7%, as traders started pulling risk across equities in response to the growing standoff between Trump and Powell.
This is the first time Powell is fighting back publicly. After a year of silence, Powell responded to the DOJ probe by saying the “threat is a consequence of not following the preferences of the President.” He added:-
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions, or whether instead, monetary policy will be directed by political pressure or intimidation.”
With just six months left in his term, Powell is now framing the fight as one about institutional survival. The Fed is expected to pause rate cuts again on January 28, and that decision may now come under even heavier political fire.
Meanwhile, gold spiked above $4,600/oz and silver jumped past $84/oz, both record highs, as safe-haven demand exploded on fears of policy instability.
The Cboe Volatility Index ticked higher, showing that traders were adding downside protection as the story broke.
Despite Monday’s early jitters, it’s coming off a strong week. On Friday, the S&P 500 and Dow both closed at record highs, with the S&P up 1% on the week, the Dow up 2.3%, and the Nasdaq Composite rising 1.9%.
In crypto, flows were mixed. Between January 5 and 9, Bitcoin spot ETFs saw a net outflow of $681 million, while Ethereum ETFs lost $68.57 million. Solana ETFs gained $41.08 million and XRP ETFs added $38.07 million.
