U.S. stocks tumbled as President Donald Trump continued to verbally attack Jerome Powell, calling on the Federal Reserve chair to cut interest rates as signs mount the president’s trade war is pushing the economy toward recession. The dollar fell with long-dated Treasuries.
The S&P 500 Index closed down 2.4% in New York, while the Nasdaq 100 Index fell 2.5%. The Cboe VIX Index hovered around 34.
Tesla Inc. plunged 5.7% ahead of results postmarket Tuesday. Sweetgreen Inc. shares fell 8.2% after the salad restaurant chain said its COO would leave the company.
Trump posted on his social media site that he favors “preemptive cuts” to interest rates and called the Fed chairman a “loser.” The last reading of the Fed’s preferred inflation gauge remains above the central bank’s target.
The broadsides started last week and raise the question of whether the central bank can retain the independence from political influence that helps underpin faith in the American financial markets.
“The market doesn’t like the Fed’s independence being challenged,” said Joe Saluzzi, co-manager of trading at Themis Trading. “The market can at least make an attempt at predicting what an independent Fed will do. If their independence is challenged, then more erratic (unpredictable) decisions could be made. And the market does not like unpredictability.”
The sell-America trade gathered momentum across other asset classes, too, as questions deepened over the country’s standing as the preeminent destination for global capital, as well as its longstanding role as the lynchpin of the international financial system. The dollar slid, while Treasuries were mixed, with the long-end falling while shorter-dated maturities rallied.
The mix of risks is fueling concern about the paths of growth and inflation — and how the Fed can balance them. While traders are pricing in at least three interest-rate cuts in the U.S. this year, former New York Fed President Bill Dudley wrote in a Bloomberg Opinion column that policymakers will likely move slower than anticipated.
Stocks have been under pressure from Trump’s incoherent trade policies.
The broad index is down by 9% since Trump unveiled sweeping tariffs on most U.S. trading partners, only to pause many of them a week later. It has fallen 16% from a February record.
Nvidia Corp. closed down 4.5% while Delta Air Lines Inc. slid 3.4% and Constellation Energy Corp. dropped 6.8%.
Other notable movers were Netflix Inc., which finished up 1.5%, after the streaming giant logged record profit in the first quarter. Meanwhile, Tesla tumbled as Wedbush’s Dan Ives said the electric-vehicle maker faces a “code red” moment.
While the Trump administration has been “transparent” with its desire to lower rates, the “ultimate outcome is impossible to predict,” said Mark Hackett, chief market strategist at Nationwide.
The current push is similar comments made in 2018 and 2019, Hackett added, though “like with tariffs, this is likely negotiating in public with the intention of jawboning a decision, as a firing would undoubtedly result in market disruption.”
Trump has been vocal over the head of the central bank not moving fast enough to slash interest rates. While legal scholars say the president cannot dismiss a Fed chair easily and Powell has no intention to resign, the White House’s comments on the matter are giving investors something to think about.
“Our view remains that the president lacks the power to remove Powell as monetary policy is a legislative function rather than an executive branch function,” TD Cowen’s Jaret Seiberg wrote in a note published Sunday evening. “That differs from other independent agencies. That said, we do not see legal questions stopping Trump if he is determined to act.”
Earnings season continues with Tesla, Alphabet Inc., Boeing Co. and Intel Corp. among the big names to report this week. Tesla will issue first-quarter earnings on Tuesday, with the electric-vehicle maker contending with an Elon Musk-induced brand crisis and uncertainty from tariffs.
Results thus far have been “mixed,” according to Canaccord Genuity’s Michael Graham. “Earnings results from these companies have yet to fully reflect tariff impacts, and it may take a few months before conclusions can be reached due to tariff-related pull forward of spending and choppy hard data,” Graham wrote in a note on Monday.
Meanwhile, data compiled by Morgan Stanley’s Michael Wilson show the S&P 500’s earnings revisions breadth — or analyst estimates upgrades versus downgrades — is now at levels rarely witnessed, approaching downside extremes in the absence of a recession.
“It’s going to be difficult for companies to appease investors this quarter, and they are very hesitant to provide guidance and using the tariff turmoil to lower expectations,” said JonesTrading’s Dave Lutz. Meanwhile, in a move that upped the ante in the ongoing trade war, China warned countries against striking deals with the U.S. that could hurt the interests of Beijing.
While respecting nations resolving trade disputes with the U.S., Beijing “resolutely opposes any party reaching a deal at the expense of China’s interests,” the Ministry of Commerce said in a statement on Monday.
“Investor sentiment surveys are coming in sharply lower, which is not a surprise given the volatility we’ve seen in April,” said Louis Navellier, founder of Navellier & Associates Inc, in a daily note. “This is historically a good time to buy, when others are selling, but historically, we’ve not had tariff tantrums in historic numbers.”
(Shown in photos: Jerome Powell, left, chairman of the U.S. Federal Reserve, and President Donald Trump, right; credit: ALM/Courtesy photo)
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