Wall Street ticks to records after shaking off worries about Trump's feud with the Fed

NEW YORK (AP) — Wall Street ticked to more records Monday after bouncing back from losses taken because of worries about the worsening feud between the White House and the Federal Reserve, one that experts warn could lead to higher inflation in the future.

The S&P 500 tacked 0.2% onto its prior all-time high set on Friday. The Dow Jones Industrial Average recovered an early loss of nearly 500 points and added 86, or 0.2%, to its own record, while the Nasdaq composite gained 0.3%.

Some nervousness was still evident in the market, though, amid concern that the Fed may be on the path to less independence in setting interest rates to keep inflation under control. Prices for gold and other investments that tend to do well when investors are nervous rose, while the value of the U.S. dollar dipped against other currencies.

Walmart helped drive the U.S. stock market higher despite the worries. It climbed 3% after learning that its stock will join the widely followed Nasdaq 100 index. Google also said Sunday that it’s expanding the shopping features in its AI chatbot by teaming up with Walmart and several other big retailers.

Google’s parent company, Alphabet, rose 1% to bring its total market value above $4 trillion following a torrid run aided by its artificial-intelligence offerings.

They helped offset losses for a slight majority of stocks within the S&P 500. Leading them all were credit card companies after President Donald Trump threatened moves that could eat into their profit.

Synchrony Financial fell 8.4%, Capital One Financial sank 6.4% and American Express dropped 4.3%. They weakened after Trump said he wanted to put a 10% cap on credit card interest rates for a year.

But it was a separate move involving Washington that grabbed the most attention across financial markets. Over the weekend, the Federal Reserve’s chair said the U.S. Department of Justice subpoenaed the Fed and threatened a criminal indictment over his testimony about renovations at its headquarters.

Through an unusual video statement released on Sunday, Fed Chair Jerome Powell said his testimony and the renovations are “pretexts” for the threat of criminal charges, which he said is really “a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.”

The Fed has been locked in a feud with Trump, who has loudly called for lower interest rates to make borrowing cheaper for U.S. households and companies and give the economy a kickstart. The Fed did lower its main interest rate three times last year and indicated more cuts may arrive this year, but it’s moved deliberately enough that Trump has nicknamed Powell “Too Late.”

White House press secretary Karoline Leavitt told reporters Monday that Trump did not direct his Justice Department to investigate Powell.

The Fed has traditionally operated separately from the rest of Washington, making its decisions without having to bend to political whims. Such independence, the thinking goes, gives it the freedom to keep interest rates high when necessary to drive down high inflation, even if it slows the economy and frustrates politicians looking to please voters.

In the bond market, the yield on the 10-year Treasury briefly rose to 4.21%, up from 4.18% late Friday, amid concerns that a less independent Fed could lead to higher inflation over the longer term. But it later eased back to 4.18%.

The worries also hit the value of the U.S. dollar, which slipped 0.4% against the euro and 0.6% against the Swiss franc.

Analysts said financial markets shook off the concerns about the Fed’s independence for several potential reasons. Traders could see “a limitation to the White House’s success in getting its way,” according to Thierry Wizman, a strategist at Macquarie Group, because Congress could deny confirmation of any nominees for the Fed from the White House.

“It is now the independence and credibility of the Department of Justice that are in question,” Sen. Thom Tillis, a Republican from North Carolina, said on social media. “I will oppose the confirmation of any nominee for the Fed—including the upcoming Fed Chair vacancy—until this legal matter is fully resolved.”

Trump has already criticized the Fed sharply, and he’s trying at the moment to fire Fed Gov. Lisa Cook, but the Fed’s rate-setting committee still seems to be acting independently.

Plus, this latest move could encourage Powell to stay on at the Fed as a governor until his term expires in 2028, even though his term as chair will end in May, said Brian Jacobsen, chief economist at Annex Wealth Management.

“With the political pressure on the Fed, he may choose to stay on as a governor out of spite,” he said. “It would deprive President Trump of the ability to stack the board with another appointee.”

On Wall Street, Abercrombie & Fitch dropped 17.7% after the retailer gave a forecasted range for profit in the final quarter of 2025 whose midpoint fell short of analysts’ expectations. Its forecast for growth in revenue also fell shy of Wall Street’s.

Other retailers that sell clothes in malls also struggled, including drops of 12.3% for Urban Outfitters and 3.5% for American Eagle Outfitters.

All told, the S&P 500 rose 10.99 points to 6,977.27. The Dow Jones Industrial Average added 86.13 to 49,590.20, and the Nasdaq composite gained 62.56 to 23,733.90.

The price of gold rose 2.5% to a record settlement of $4,614.70 per ounce

In stock markets abroad, indexes were mixed across Europe following a stronger showing in Asia. Stocks jumped 1.4% in Hong Kong and 1.1% in Shanghai for two of the world’s bigger gains following reports that Chinese leaders were preparing more help for the economy.

___

AP Business Writers Matt Ott and Elaine Kurtenbach contributed.