Wall Street rattles as Trump denies he'll fire Federal Reserve boss
Such a move could help Wall Street get the lower interest rates it loves but would also risk a weakened Fed unable to make the unpopular moves needed to keep inflation under control.
The S&P 500 was up by 0.3% in late trading after whipping through an earlier drop and subsequent recovery.
The Dow Jones Industrial Average was up 207 points, or 0.5%, with roughly an hour remaining in trading, and the Nasdaq composite was adding 0.2% to its own record set the day before.
Stocks had been rising modestly in the morning, before news reports saying that Trump was likely to fire Fed Chair Jerome Powell quickly sent the the S&P 500 down by 0.7%.
ADVERTISEMENT
When later asked directly if he was planning to fire Powell, Trump said, "I don't rule out anything, but I think it's highly unlikely". That helped calm the market, and stocks erased their losses, though Trump added that he could still fire Powell if "he has to leave for fraud". Trump has been criticising a US$2.5 billion (NZ$4.2 billion) renovation project underway of the Fed's headquarters.
Federal Reserve Board Chairman Jerome Powell. (Source: Associated Press)
Trump's main problem with Powell has been how the Fed has not cut interest rates this year, a move that would have made it easier for US households and businesses to get loans to buy houses, build factories and otherwise boost the economy. Lower interest rates could also help the US government, which is set to borrow and add a lot more to its debt after approving a wide range of tax cuts.
Powell, meanwhile, has been insisting that he wants to wait for more data about how Trump's stiff proposed tariffs will affect the economy and inflation before the Fed makes its next move.
The Fed has two main jobs: keeping the job market strong while keeping inflation under control. Lowering interest rates would help boost the economy but would also give inflation more fuel when tariffs may be set to push prices for US households higher.
A report on Wednesday said inflation at the wholesale level slowed to 2.3% last month, which was better than economists expected. It's an encouraging signal, but it came a day after another report suggested that Trump's tariffs are pushing up the prices US shoppers are paying for toys, apparel and other imported products.
Anthony Matesic works on the floor at the New York Stock Exchange in New York. (Source: Associated Press)
ADVERTISEMENT
Trump's tariffs are making their weight felt across financial markets. ASML, the world's leading supplier of chipmaking gear, warned that it can't guarantee growth next year, after delivering an expected 15% growth in sales for 2025.
Conditions still look strong for ASML's customers in the artificial-intelligence business, but chief executive Christophe Fouquet said in a video that "the level of uncertainty is increasing, mostly due to macroeconomic and geopolitical consideration. And that includes, of course, tariffs".
Shares that trade in the United States of ASML, which is based in the Netherlands, fell 7.9%.
Stocks of several US companies reporting stronger profits for the latest quarter than analysts expected helped offset that.
Johnson & Johnson jumped 5.9% after the drug and medical device giant beat analysts' sales and profit targets and raised its full-year forecasts for both. Chief executive Joaquin Duato said it expects "game-changing approvals and submissions" in the second half of 2025 on an array of products, including for lung and bladder cancer.
PNC Financial Services Group added 1% following its better-than-expected quarterly report, thanks in part to loan growth despite what chief executive Bill Demchak called "an uncertain macro environment".
GrabAGun, an online retailer of firearms and ammunition, swung sharply after combining with Colombier Acquisition Corp. II and taking its spot on the stock market under the ticker symbol "PEW". Donald Trump Jr, the son of President Trump, is joining the company's board.
ADVERTISEMENT
The stock quickly went from an early gain of 19% to a drop of 31% before moderating its loss to 24.8%, with several halts in trading along the way.
In the bond market, the yield on the 10-year U.S. Treasury fell to 4.46% from 4.50% late Tuesday. It had been as low as 4.44% earlier earlier in the day, but it climbed following the reports that Trump was likely to fire Powell.
The morning's headlines in 90 seconds, including an Auckland teen seriously ill in Vietnam, Trump slams supporters, and Icelandic volcano prompts evacuations. (Source: 1News)
A new Fed chair friendlier to Trump could mean lower short-term interest rates but also the opposite effect on longer-term yields. That's because a less independent Fed would raise worries that it may also let inflation run higher in the future by being slow to raise interest rates.
In stock markets abroad, indexes mostly fell amid relatively modest movements.
Stocks rose 0.7% in Jakarta after Trump said Tuesday that he plans to charge imports from Indonesia a tariff of 19%, instead of the 32% that he had threatened earlier, after reaching a trade deal.
Indonesia's central bank also cut its key interest rate by 0.25 percentage points on Wednesday, to 5.25%.
ADVERTISEMENT
"We have calculated everything and discussed everything. The most important thing for me is my people, as I must protect the interests of our workers," Indonesian President Prabowo Subianto told reporters, adding that "this is our offer, and we are not able to give more (to the United States)."
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
NZ Herald
3 hours ago
- NZ Herald
‘Very quiet': NZX up 0.45% as investors await earnings
The New Zealand stock market edged up on a slow day of trading as investors paused before the upcoming earnings season. The benchmark S&P/NZX 50 closed 0.45% higher on Monday at 12,910.74 points. The index has steadily gained since June, but remains over 1% down in the year-to-date. With 22.7
NZ Herald
3 hours ago
- NZ Herald
Round three - United States and China hold economic talks as trade truce nears end
The Trump Administration has been trying to win concessions from many countries before an August 1 deadline for reimposing tariffs announced in April. Those levies were suspended in order to reach trade deals. Over the last week, the Trump Administration has announced deals with some of America's biggest trading partners in quick succession. Last week the US and Japan finally agreed to a deal that included a 15% tariff on Japanese imports and a pledge from Japan to invest US$550 billion in the US. Today, Trump announced that he had also reached a deal with the European Union, whose economies rely on exports to the US. The deal would put a 15% tariff on many European exports, including cars. One of the biggest unknowns is what will happen with China, which remains one of America's largest source of imports. After a tit-for-tat period of tariffs and retaliation, the two nations have come to something of an uneasy truce after talks in Geneva in May, and in London in June. Today, before he met with European officials, Trump implied that some kind of trade arrangement with China might be close at hand. 'We just struck a deal with Japan as you know, and we're very close to a deal with China,' he said. This will be the first meeting between the countries without an imminent crisis, like the tariff standoff or China's economically crippling ban on rare earth exports this year. Trade experts said the list of potential topics for discussion was long, ranging from Trump's push to get China to stop the flow of fentanyl to the US, to America's concerns about its purchases of Russian and Iranian oil, and recent exit bans that have prevented US citizens from leaving China. US officials appear to be looking forward to more ambitious trade talks in the months to come. Those could include Chinese purchases of American products, steps to open the Chinese market and, potentially, Chinese investment in the US. They are also likely seeking to lay the groundwork for a potential meeting between Trump and Xi Jinping, the Chinese leader, this year. Administration officials are considering a trip to Beijing before a meeting of Asian and Pacific countries in South Korea in October or potentially connecting Trump and Xi on the sidelines of an international meeting. Michael Pillsbury, a former government official who has advised the Trump Administration on China, said this would be Trump's sixth summit meeting with Xi. Each of those summits had a minimum of two hours of dialogue, and Trump went prepared with specific dealmaking requests, he said. 'The President feels it's better to deal face to face,' he said. Trade experts are also wondering whether US technology controls or an agreement to transfer ownership of TikTok may be on the negotiating table. On CNBC last week, Howard Lutnick, the Secretary of Commerce, said that the US had submitted a proposal to China for transferring ownership of TikTok to American companies, and that the Administration was waiting for the Chinese response. The topic was 'not officially' part of the trade talks, he said, 'but unofficially, of course'. Tensions between the US and China started to spiral after Trump announced his 'Liberation Day' tariffs in early April. China was the only country to immediately retaliate, matching Trump's tariffs of 34% with 34% tariffs on American products. Beijing also set up a licensing system to restrict exports of seven rare earth elements that are processed almost exclusively in China and used in electric cars, smart bombs and other high-tech devices. Trump then responded by ratcheting up tariffs on Chinese products to a minimum of 145%, which brought much of the trade between the countries to a halt. The previous rounds of negotiations secured a temporary truce that included China's relaxing its restrictions on shipments of valuable rare earth minerals and magnets needed by US manufacturers. In return, US officials agreed to roll back limits on exports of US products and technology, including ethane and airplane parts, as well as the proposed visa restrictions. US tariffs on Chinese imports were scaled back to 30%, while China has 10% tariffs on American products. The truce is scheduled to expire on August 12, after which tariffs would rise by 10%. However, Bessent has been optimistic that the truce could be extended. In an interview on the Fox Business Network last week, Bessent said that 'trade is in a good place' with China. He added that he hoped to begin having broader discussions with his counterparts about rebalancing the Chinese economy and encouraging China to curb purchases of Russian and Iranian oil. Bessent said China was in a manufacturing slump and faced a residential real estate market crisis. He argued Beijing must focus on building a consumer economy. 'They can't export their economic problems to the rest of the world; they need to solve them,' Bessent said. US companies continue to have a rash of criticisms about doing business in China, including the country's newly established rare earth licensing system. The processing time for licences is long, American firms say, and China requests proprietary and sensitive business information as part of the applications. In a survey released this month, members of the US-China Business Council said strained relations and tariffs between the two countries remained their biggest concerns. But they also said Chinese policies favouring domestic companies were eroding confidence in doing business in the country. This article originally appeared in The New York Times. Written by: Alan Rappeport and Ana Swanson ©2025 THE NEW YORK TIMES
NZ Herald
3 hours ago
- NZ Herald
Economies race to avoid steeper tariffs before Friday, US and China hold talks tomorrow in Sweden
Where do other US trade talks stand? South Korea: Extra pressure Seoul is racing to reach a deal with Washington, as Tokyo's success in landing an agreement has 'amped up the pressure for South Korea', a government source told AFP. Local media reported that Seoul was preparing to propose more than US$100 billion in investment as part of a broader agreement, with expected participation by major firms such as Samsung and Hyundai Motor. The South Korean Government did not confirm this. South Korean officials have outlined proposals to deepen collaboration in sectors like shipbuilding, semiconductors, and batteries. National Security Adviser Wi Sung Lak has told reporters that the two countries are in 'the final and most crucial phase of negotiations' to avert Trump's proposed 25% duty. India: Cautious optimism Indian Commerce Minister Piyush Goyal told Bloomberg Television last week that he was optimistic his country could reach an agreement with the US to avert Washington's 26% tariff threat. Goyal insisted there were not any sticking points in the US-India relationship or in trade talks and clarified that immigration rules - including those around H-1B visas for skilled workers - had not come up in negotiations. Despite Goyal's remarks, local media reported the prospects of an interim deal before August 1 had dimmed. Taiwan: Working hard Taiwanese Premier Cho Jung Tai said last week that officials are 'working hard' on negotiations, amid worries that an unfavourable tariff level could hit the self-ruled island's economy. Vice-President Hsiao Bi Khim said Taipei's negotiating team was 'working almost 24 hours a day to achieve trade balance and Taiwan's industrial interests, and even to further deepen co-operation'. Canada, Mexico: Deal unclear Although Canada and Mexico were spared from Trump's 'reciprocal' tariffs announced in April, goods from both countries entering the US generally face a separate 25% duty if they fall outside a North American trade pact. This figure stands to jump to 30% for Mexico come August 1, while the level for Canada was set at 35%. Mexican President Claudia Sheinbaum said her Administration was 'doing everything' possible to avert the duties and that she would speak with Trump if necessary to try to reach a pact. Trump told reporters at the weekend there was no deal with Canada so far. Brazil: Political nature Brazil is girding for a virtual trade embargo on its planes, grains, and other goods if Trump's threatened 50% tariff on its exports takes effect on August 1. The US runs a trade surplus with Latin America's biggest economy, which was not originally expected to face steeper tariffs under Trump's 'reciprocal' duties plan. Trump has not attempted to hide the political motivation in targeting Brazil, citing a judicial 'witch hunt' against his right-wing ally, former president Jair Bolsonaro, when he unveiled the tariff rate. The political nature of the spat makes a last-minute deal appear less likely. Tariff categories Here is a summary of duties Trump has introduced in his second term. Global tariffs US 'reciprocal' tariffs - imposed under legally contentious emergency powers - are due to jump from 10% to various steeper levels for a list of dozens of economies. The hikes were to take effect on July 9 but Trump postponed them days before imposition, marking a second delay since their shock unveiling in April. A 10% 'baseline' levy on most partners, which Trump imposed in April, remains in place. Certain products like pharmaceuticals, semiconductors and lumber are excluded from Trump's 'reciprocal' tariffs but may face separate action under different authorities. This has been the case for steel, aluminium, and soon copper. Gold and silver, alongside energy commodities, are also exempted. Canada, Mexico Canadian and Mexican products were hit by 25% US tariffs shortly after Trump returned to office, with a lower rate for Canadian energy. Trump targeted both neighbours over illegal immigration and fentanyl trafficking, also invoking emergency powers. Products entering the United States under the USMCA North American free trade pact, covering large swathes of goods, are expected to remain exempt - with Canadian energy resources and potash, used as fertiliser, to still face lower rates. China focus Trump has also taken special aim at China. The world's two biggest economies engaged in an escalating tariffs war this year before their temporary pullback. The countries imposed triple-digit duties on each other at one point, a level described as a trade embargo. After high level talks, Washington lowered its levies on Chinese goods to 30% and Beijing slashed its own to 10%. This pause is set to expire on August 12, and officials will meet for further talks tomorrow in the Swedish capital of Stockholm. The US level is higher as it includes a 20% tariff over China's alleged role in the global fentanyl trade. Beyond expansive tariffs on Chinese products, Trump ordered the closure of a duty-free exemption for low-value parcels from the country. This adds to the cost of importing items like clothing and small electronics. Autos, metals Trump has targeted individual business sectors too, under more conventional national security grounds, imposing a 25% levy on steel and aluminium imports which he later doubled to 50%. The US President has unveiled plans for a 50% tariff on copper imports starting August 1 as well and rolled out a 25% tariff on imported autos, although those entering under the USMCA can qualify for a lower rate. Trump's auto tariffs impact vehicle parts too, but new rules ensure automakers paying vehicle tariffs will not also be charged for certain other duties. He has ongoing investigations into imports of lumber, semiconductors, pharmaceuticals and critical minerals that could trigger further duties. Legal challenges Several legal challenges have been filed against the tariffs Trump invoked citing emergencies. The US Court of International Trade ruled in May that the President had overstepped his authority, but a federal appeals court has allowed the duties to remain while it considers the case. If these tariffs are ultimately ruled illegal, companies could possibly seek reimbursements. -Agence France-Presse
