Highlights
President Trump's attacks on Federal Reserve Chair Jerome Powell and Fed policy independence hit US stocks again Monday with big losses across the board. Rising bond yields and a falling dollar hurt equities and reflected the return of the sell America trade. The Dow Jones industrial average lost 2.5 percent, the S&P 500 fell 2.4 percent and the Nasdaq was down 2.6 percent on top of steep losses last week.
Bond yields rose, especially in longer maturities, while the dollar and oil prices sank. That followed Trump's social media post early Monday attacking Powell and calling for rate cuts. A market already consumed with fear of rising inflation and recession in response to tariff policy now has to worry that Trump will move ahead to remove the Fed as a credible inflation fighter and bastion of stability for the economy. Monday's attack on Powell followed Trump's threat last week to fire the Fed chair and reports on Friday that Trump's aides were exploring how Powell could be removed.
On an otherwise quiet news day, markets were keying on Trump's attacks on the Fed and on reports suggesting no movement toward deescalating the US-China trade war, and no progress in talks involving other US trade partners. Investors reacted poorly to a warning from China against nations making trade deals with the US that hurt China. In more conventional macro news, the sole US economic report showed the index of leading economic indicators dropped more than expected on tariff worries. That was in March, before Trump announced unexpectedly high universal tariffs on April 2.
Megacaps led the stock selloff on Monday. Worst sectors included information technology, consumer discretionary, communications services, industrials and utilities.
Bond yields rose, especially in longer maturities, while the dollar and oil prices sank. That followed Trump's social media post early Monday attacking Powell and calling for rate cuts. A market already consumed with fear of rising inflation and recession in response to tariff policy now has to worry that Trump will move ahead to remove the Fed as a credible inflation fighter and bastion of stability for the economy. Monday's attack on Powell followed Trump's threat last week to fire the Fed chair and reports on Friday that Trump's aides were exploring how Powell could be removed.
On an otherwise quiet news day, markets were keying on Trump's attacks on the Fed and on reports suggesting no movement toward deescalating the US-China trade war, and no progress in talks involving other US trade partners. Investors reacted poorly to a warning from China against nations making trade deals with the US that hurt China. In more conventional macro news, the sole US economic report showed the index of leading economic indicators dropped more than expected on tariff worries. That was in March, before Trump announced unexpectedly high universal tariffs on April 2.
Megacaps led the stock selloff on Monday. Worst sectors included information technology, consumer discretionary, communications services, industrials and utilities.
Definition
Market Reflections track market reaction to the trading day's major events. Economic data, policymaker speeches, and company news are featured in this report as well as key indexes and financial instruments.
Description
Understanding why markets respond as they do is fundamental for an investor. Market Reflections help explain how the day's events, news, and data impact the outlook for the economy and for market prices.
