Markets Slide as Trump Renews Attacks on Fed Chair

 

Markets Slide as Trump Renews Attacks on Fed Chair

 

President Trump’s pressure on the Federal Reserve, on top of the uncertainty about his tariff policy, continued to jar investors as stocks, bonds, oil and the U.S. dollar all tumbled.

 

Danielle KayeKevin Granville

By Danielle Kaye and Kevin Granville

Danielle Kaye reported from New York, and Kevin Granville from Seoul.

April 21, 2025

https://www.nytimes.com/2025/04/21/business/trump-tariffs-stock-markets.html

 

Stocks slumped, bonds sold off and the U.S. dollar continued to lose ground on Monday as President Trump renewed his attacks on Jerome H. Powell, the chair of the Federal Reserve, unnerving already-anxious investors who see the independence of the central bank as critical to the health of the American economy.

 

Wall Street began the day with a slump, but the sell-off gained steam after Mr. Trump targeted Mr. Powell in a social media post, calling him “a major loser” and urging the Fed to cut interest rates. Mr. Trump also suggested that an economic slowdown would be Mr. Powell’s fault.

 

After a late recovery, the S&P 500 dropped 2.4 percent for the day. All of the major sectors in the index fell, with the technology, energy and consumer discretionary sectors hardest hit.

 

The president’s attacks on Mr. Powell add to uncertainty that has already been injected into financial markets by the chaotic rollout of tariffs and threats of more to come, said John Mowrey, the chief investment officer at NFJ Investment Group.

 

“There’s a slew of things that could be very unsettling to the market as it tries to navigate what it doesn’t really know how to navigate, which is policy uncertainty about tariffs,” Mr. Mowrey said, adding that “Powell is one of them.”

 

The Trump administration has acknowledged an uptick in the probability of a recession. Mr. Trump’s criticism of Mr. Powell, Mr. Mowrey said, signals an effort to “have the cards ready to blame other people should that occur.”

 

Mr. Trump had also lashed out at Mr. Powell last week, saying to reporters on Thursday that “if I want him out, he’ll be out of there real fast — believe me.”

 

A day earlier, the Fed chair had warned in a speech that tariffs could create a “challenging scenario” by putting the central bank’s two main goals — stable inflation and a healthy labor market — in tension.

 

Stock investors tend to favor lower interest rates, which make it easier for companies to borrow and expand their businesses. Share prices often rise when investors expect the Fed to cut rates — even if it is the result of bad economic news. But the recent market reaction to Mr. Trump’s calls for lower rates suggests that investors see the threat to Fed independence as outweighing any benefit from rate moves.

 

Mr. Trump is said to be wary of trying to oust Mr. Powell before the end of his term as chair next year, which would probably inject even more volatility into already jittery markets. The political independence of the Fed is seen as critical across world financial markets, and threats to that independence have made investors anxious about the stability of assets priced in dollars, long considered a safe and reliable place to park money.

 

That includes U.S. government bonds, which have emerged as a major concern for Wall Street and the White House, as they’ve tumbled in recent weeks. On Monday, they showed renewed stress, with the yield on 10-year Treasury notes jumping above 4.4 percent as investors sold the bonds. (Yields move inversely to prices.)

 

The U.S. dollar continued its slide against nearly every other major currency on Monday. It fell about 1 percent against the euro, to the lowest level in more than three years. The dollar also fell against the Japanese yen, to its lowest level since September.

 

On the surface, a weaker dollar makes American goods cheaper overseas, and imports more expensive. But a substantial shift could signal that investors are moving away from a decades-long belief that the dollar and U.S. assets are a safe haven, and they are instead choosing to put their money elsewhere.

 

“We believe dollar weakness will continue,” Win Thin, a managing director at Brown Brothers Harriman, said in a note. He added, though, that recent gains in some currencies might not last because economic growth was likely to weaken.

 

The angst about the Fed’s independence on Monday came against a backdrop of investors’ unease about the global economy. Mr. Trump has drastically raised U.S. tariffs on imports, as high as 145 percent on Chinese goods, to flatten U.S. trade imbalances. Beyond tariffs, Washington has tightened trade on critical items such as advanced silicon chips. China has responded with high tariffs on U.S. goods and restrictions on exports of rare earth minerals and magnets, essential for electric car motors and other technologies.

 

Economists project these changes will raise prices while impeding growth.

 

“‘News out of Washington’ remains the primary catalyst for markets,” said Chris Larkin, head of trading and investing at E-Trade. “Choppiness will likely continue until trade policy clarifies,” he added.

 

Since Mr. Trump’s announcement of tariffs against nearly every U.S. trading partner on April 2, the S&P 500 has fallen roughly 9 percent. The benchmark is about 16 percent below its closing high in mid-February, as rounds of selling have pulled the index closer to a bear market, a Wall Street term for when a stock index falls 20 percent from its last peak.

 

An early sign of the upheaval in international trade came from South Korea, where the customs office said on Monday that exports to the United States fell more than 14 percent in the first 20 days of April, versus the same period last year. That was much weaker than expected, analysts at Nomura pointed out, calling the numbers a “canary in the coal mine.”

 

The International Monetary Fund has warned that its latest projections for the global economy, to be released on Tuesday, will forecast slower growth and higher inflation this year than previously anticipated.

 

Oil prices, which are often considered a barometer of expectations about economic growth, dropped nearly 2 percent on Monday, with Brent crude at about $66.67 a barrel. Oil has dropped about 20 percent from its mid-January high.

 

Ben Casselman contributed reporting.

 

Danielle Kaye is a business reporter and a 2024 David Carr Fellow, a program for journalists early in their careers.