Stocks had been rising modestly in the morning following a better-than-expected update on inflation across the country. But midmorning news reports that Trump was likely to fire Fed Chair Jerome Powell quickly sent the the S&P 500 down as much as 0.7%. When later asked directly if he was planning to fire Powell, Trump said, "I don't rule out anything, but I think it's highly unlikely, unless he has to leave for fraud."
Trump has been angry with Powell for not cutting interest rates this year, a move that would make it easier for U.S. households and businesses to get loans to buy houses, build factories and otherwise boost the economy. Lower interest rates could also help the U.S. government, which is set to borrow and add a lot more to its debt after approving a wide range of tax cuts.
But Powell has been insisting that he wants to wait for more data about how Trump's tariffs will affect the economy and inflation before making the Fed's next move. While lower interest rates can help boost prices for investments, they can also give inflation more fuel. And the economy only recently came out of the post-pandemic shock that sent inflation over 9%.
A report on Wednesday said that inflation slowed by more last month at the wholesale level than economists expected, down to 2.3%. It's an encouraging signal, but just a day before, another report suggested that Trump's tariffs are indeed pushing up the prices U.S. shoppers are paying for toys, apparel and other imported products.
Trump’s tariffs are making their weight felt across financial markets. ASML, the world’s leading supplier of chipmaking gear, warned that it can’t guarantee any growth next year, after delivering an expected 15% growth in sales for 2025.
Conditions still look strong for ASML’s customers in the artificial-intelligence business, but CEO Christophe Fouquet said in a video that “the level of uncertainty is increasing, mostly due to macroeconomic and geopolitical consideration. And that includes, of course, tariffs.”
Shares of ASML, which is based in the Netherlands, that trade in the United States fell 9.1%.
Stocks of several U.S. companies reporting stronger profits for the latest quarter than analysts expected helped to offset that.
Johnson & Johnson jumped 6.5% after the drug and medical device giant beat analysts’ sales and profit targets and raised its full-year forecasts for both. CEO Joaquin Duato said it expects “game-changing approvals and submissions” in the second half of 2025 on an array of products, including for lung and bladder cancer.
PNC Financial Services Group added 0.4% following its better-than-expected quarterly report, thanks in part to loan growth despite what CEO Bill Demchak called “an uncertain macro environment.”
GrabAGun, an online retailer of firearms and ammunition, swung sharply in its first day of trading after combining with Colombier Acquisition Corp. II and taking its spot on the stock market under the ticker “PEW.” Donald Trump Jr., the son of President Trump, is joining the company's board.
The stock quickly went from an early gain of 19% to a drop of 31% before moderating its loss to 24.9%, with several halts in trading along the way.
In the bond market, the yield on the 10-year U.S. Treasury fell to 4.47% from 4.50% late Tuesday. It had been lower earlier in the day, but it erased some of its losses following the reports that Trump was likely to fire Powell. While a new Fed chair friendlier to Trump could lower short-term interest rates more quickly, the threat of a less independent Fed would raise worries that it may also let inflation run higher in the future. That, in turn, can push up yields for longer-term bonds.
In stock markets abroad, indexes were mostly lower amid relatively modest movements.
Stocks rose 0.7% in Jakarta after Trump said Tuesday that he plans to charge imports from Indonesia a tariff of 19%, instead of the 32% that he had threatened earlier, after reaching a trade deal.
Indonesia’s central bank also cut its key interest rate by 0.25 percentage points on Wednesday, to 5.25%.
“We have calculated everything and discussed everything. The most important thing for me is my people, as I must protect the interests of our workers,” Indonesian President Prabowo Subianto told reporters, adding that “this is our offer, and we are not able to give more (to the United States).”
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AP Business Writers Matt Ott, Kelvin Chan and Elaine Kurtenbach contributed.
Credit: AP
Credit: AP
Credit: AP
Credit: AP