Wall Street rides roller-coaster after Trump walks back talk of firing Powell
The S&P 500 was edging up by 0.1 per cent in midday trading after whipping through an earlier, jagged drop and subsequent recovery.
The Dow Jones Industrial Average was up 94 points, or 0.2 per cent, as of 1 p.m. Eastern time, and the Nasdaq composite was adding 0.1 per cent to its own record set the day before.
The Toronto Stock Exchange was up roughly 0.2 per cent just after 1pm Eastern time.
Stocks had been rising modestly in the morning following a better-than-expected update on inflation across the country. But midmorning news reports that Trump was likely to fire Fed Chair Jerome Powell quickly sent the the S&P 500 down by 0.7 per cent.
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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, but Trump said he could still fire Powell if 'he has to leave for fraud.' Trump has been criticizing a $2.5 billion renovation project underway of the Fed's headquarters.
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 U.S. households and businesses to get loans to buy houses, build factories and otherwise boost the economy. Lower interest rates could also help the U.S. government, which is set to borrow and add a lot more to its debt after approving a wide range of tax cuts.
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But Powell has been insisting that he wants to wait for more data about how Trump's tariffs will affect the economy and inflation before the Fed makes its next move. While lower interest rates can help boost prices for investments, they can also give inflation more fuel. And the economy only recently came out of the shock that sent inflation over nine per cent in the summer of 2022.
A report on Wednesday said that inflation at the wholesale level slowed to 2.3 per cent last month, which was better than economists expected. It's an encouraging signal, but just a day before, another report suggested that Trump's tariffs are indeed pushing up the prices U.S. shoppers are paying for toys, apparel and other imported products.
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2:21
Trump vs. Powell: POTUS, Fed chair agree state of U.S. economy is strong, but disagree on interest rates
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 any growth next year, after delivering an expected 15 per cent growth in sales for 2025.
Conditions still look strong for ASML's customers in the artificial-intelligence business, but CEO 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 9.2 per cent.
Stocks of several U.S. companies reporting stronger profits for the latest quarter than analysts expected helped to offset that.
Johnson & Johnson jumped 6.2 per cent after the drug and medical device giant beat analysts' sales and profit targets and raised its full-year forecasts for both. CEO 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.
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PNC Financial Services Group added 0.9 per cent following its better-than-expected quarterly report, thanks in part to loan growth despite what CEO 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 'PEW.' Donald Trump Jr., the son of President Trump, is joining the company's board.
The stock quickly went from an early gain of 19 per cent to a drop of 31 per cent before moderating its loss to 26.5 per cent, with several halts in trading along the way.
In the bond market, the yield on the 10-year U.S. Treasury fell to 4.47 per cent from 4.50 per cent late Tuesday. It had been as low as 4.44 per cent earlier earlier in the day, but it climbed following the reports that Trump was likely to fire Powell.
While a new Fed chair friendlier to Trump could mean lower short-term interest rates, it could have 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.
In stock markets abroad, indexes mostly fell amid relatively modest movements.
Stocks rose 0.7 per cent in Jakarta after Trump said Tuesday that he plans to charge imports from Indonesia a tariff of 19 per cent, instead of the 32 per cent that he had threatened earlier, after reaching a trade deal.
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Indonesia's central bank also cut its key interest rate by 0.25 percentage points on Wednesday, to 5.25 per cent.
'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).'
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