Speculation about the dismissal of Jerome Powell, chair of the U.S. Federal Reserve (Fed), caused the New York stock market to plummet during the day on the 16th (local time) but rebounded thanks to President Donald Trump's clarification. The tech-heavy Nasdaq composite index hit a record high.
On that day, the Dow Jones Industrial Average closed up 231.49 points (0.53%) at 44,254.78. The Standard and Poor's (S&P) 500 index recorded a gain of 19.94 points (0.32%) to finish at 6,263.70, while the Nasdaq composite index ended up 52.69 points (0.25%) at 27,730.49, setting another record high.
The New York stock market, which had been showing an upward trend at the start of the session, transitioned into a decline after reports surfaced in the morning that Trump could soon dismiss Powell. U.S. media outlets, including CBS, reported that Trump had asked Republican lawmakers for their opinions on Powell's dismissal during a closed-door meeting the previous day, and the lawmakers agreed.
Anna Paulina Luna (Republican-Florida) tweeted on the social media platform X that she heard from "very reliable sources" about Powell's dismissal, stating, "The dismissal is imminent, and I am 99% sure of it." The S&P 500 index fell by 0.7% at one point due to this news.
However, President Trump dismissed the speculation about the dismissal during a meeting with reporters at the White House, saying, "The chances are very low," and the stock market quickly rebounded.
The market expressed concern that the mid-term dismissal of the Fed chair could be interpreted as a violation of the independence of the Central Bank, and that an actual dismissal could send a negative signal to global investors.
The bond market was also shaken. According to Tradeweb, the yield on 30-year U.S. Government Bonds surged above 5% immediately following the dismissal reports, reaching 5.08%, before showing some retreat after Trump's comments. However, it maintained just above 5% until the market closed.
Dylan Bell, Chief Investment Officer (CIO) of Calvey Investment, explained, "The independence of the Fed has significant implications for the overall economy," adding that "the market reaction immediately after the dismissal report reflected these concerns."