Wall Street ends higher after brief slump on Powell firing confusion
Bank stocks mixed after Q2 earnings
U.S June PPI unchanged on a monthly basis
(Updates to the close, adds analyst comment)
July 16 (Reuters) - Wall Street benchmarks ended modestly higher on Wednesday, with the Nasdaq Composite posting its latest record finish, despite a chaotic half hour when news reports suggested U.S. President Donald Trump was set to fire Federal Reserve Chair Jerome Powell.
Shortly before midday, the main U.S. stock indexes fell sharply, the dollar plunged and Treasury yields rose after Bloomberg News reported the possibility of replacing Powell, citing an unidentified White House official.
Separately, Reuters News reported, citing a source, that Trump was open to the idea of firing Powell.
Trump was quick to deny the reports, even as he unleashed a new barrage of criticism against Powell for not cutting interest rates.
"The Fed's independence is hugely important to our overall economy, so you saw the market react when that initial headline came out," said Dylan Bell, chief investment officer at CalBay Investments.
Trump's denial revived equity markets after the benchmark S&P 500 fell as much as 1% and the Nasdaq dropped as much as 1.1%.
According to preliminary data, the S&P 500 gained 19.65 points, or 0.31%, to end at 6,263.41 points, while the Nasdaq Composite gained 51.82 points, or 0.25%, to 20,729.62. The Dow Jones Industrial Average rose 220.61 points, or 0.50%, to 44,243.90.
It was the fifth session in six that the technology-heavy Nasdaq index has posted a record close.
Since Trump's April tariff announcement, which initially sent U.S. equities into a spin, U.S. stock markets have been on a tear. The S&P 500 most recently posted a record finish last week.
Amid this buoyancy though has been investor angst about the prospect of Powell being removed from his job before his term ends next May, as Trump has repeatedly criticized him for not cutting U.S. rates quickly enough.
The CBOE Volatility Index, Wall Street's "fear gauge," hit a more than three-week high in the wake of the initial Powell reports, but eased from those levels.
Despite Trump's demands for easier credit, Fed officials have resisted cutting rates until there is clarity on whether his tariffs on U.S. trading partners reignite inflation.
The chance of a rate cut in September was viewed around 56% earlier in the day, according to CME FedWatch.
Before the Bloomberg report, the session was choppy as investors were on edge after a mixed bag of inflation data muddied the economic outlook. Producer prices flatlined in June, as tariff-driven goods costs were balanced out by weaker service prices.
Just a day earlier, unexpectedly strong consumer inflation had already dented hopes for deeper Fed rate cuts, with Trump's tariffs partly fueling the uptick in prices.
On Wednesday, the second day of this earnings season, another round of stronger profits from Wall Street's big banks failed to ignite their own stock prices.
Goldman Sachs inched higher after notching a 22% earnings surge.
Both Bank of America and Morgan Stanley joined the trend of higher profits fueled by trading desks navigating market turbulence in the second quarter. Their shares both declined though.
Johnson & Johnson soared, and was one of the best performers on the S&P 500, after halving its expectations for costs this year related to new tariffs and raising its full-year sales and profit forecast.
Semiconductor stocks were sluggish after news that Nvidia would be allowed to sell its H2O chips in China had fueled gains in the previous session. The semiconductor index slipped from the 12-month high recorded on Tuesday.
(Reporting by Sruthi Shankar, Pranav Kashyap and Nikhil Sharma in Bengaluru and David French and Suzanne McGee in New York; additional reporting by Medha Singh; Editing by Saumyadeb Chakrabarty, Maju Samuel and Richard Chang)
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