Stocks rallied off their session lows, with the S&P 500 and Dow Jones Industrial Average hitting new all-time highs as investors shook off the Department of Justice opening a criminal investigation into Federal Reserve Chair Jerome Powell.
The S&P 500 rose 0.16% to end at 6,977.27, while the Dow Jones Industrial Average ticked up 86.13 points, or 0.17%, and settled at 49,590.20. Both indexes touched fresh all-time intraday highs and closed at records. The Nasdaq Composite was up 0.26% and closed at 23,733.90.
The major averages rebounded off their worst levels of the session, helped by gains in Walmart and some technology stocks. The Dow was down nearly 500 points, and the S&P 500 was off 0.5% at session lows. Alongside the S&P 500 and the 30-stock Dow, the Russell 2000 index notched a fresh all-time high as well.
Trump's call to cap credit card rates for one year at 10% was also causing some market indigestion to start the week. Critics fear Trump's plan to aid affordability would backfire and restrict lending, hurting consumers — along with bank profitability. Bank stocks were the hardest hit Monday, with Citigroup down about 3%. JPMorgan and Bank of America were off by more than 1%. Capital One shares slid 6%.
"It doesn't matter that much, in some sense," Rob Williams, chief investment strategist at Sage, told CNBC. "I think it's some noise, and it's not even pushing rates around that much ... the focus is going to be on data," he continued, pointing to the upcoming release of the consumer price index for December on Tuesday.
The S&P 500 clawed its way back into the green after starting off the session lower. U.S. equities were under pressure following Powell's confirmation in an unusual direct video statement Sunday evening that federal prosecutors have opened a criminal investigation related to his Senate Banking Committee testimony on the renovation of Fed office buildings. Powell said the investigation was another attempt by Trump to influence the central bank's monetary policy and he would not bow to the pressure. His term as chair is up in May.
The stock market in 2025 largely ignored Trump's attempts to pressure the Fed as the central bank went on anyway to cut rates three times as inflation stabilized. But the Fed is largely expected to hold off on further cuts when it next meets later this month as it waits to see how the inflation picture and economy unfold in the new year. Trump has made clear he would like to see the Fed continue to bring rates lower.
"The impact of Chairman Powell being under investigation is likely a long-term impact, meaning it's not going to change interest rates in the near term; it's not going to change inflation in the near term," Jim Lebenthal, chief markets strategist at Cerity Partners, said to CNBC.
With the anticipation of "pretty good" earnings this week and CPI possibly coming in "well below 3%," not to mention an economy that's "growing rapidly," Lebenthal said that there are just "too many good things" in the short term. That's what's keeping the broader market higher, even if the investigation spells bad news in the long term, he said.
"Anybody who is on the Federal Open Market Committee understands that if they don't do what the president wants, if they don't lower rates, they may be fired the way Lisa Cook has been at least theoretically fired or they may be the subject of an investigation the way Chairman Powell is," Lebenthal continued. "For the new chairman and for anyone on the board, they're going to be more inclined to lower interest rates. That will eventually cause inflation, and it will eventually cause higher long-term interest rates, but those effects are not going to be felt until the end of the year at the earliest."
Gold futures, which are seen as a hedge against diminishing Fed independence, jumped 2.5% and posted a record close of $4,614.7. Investors fear a political central bank would be hesitant to snuff out resurgent inflation.
Walmart gained 3% on enthusiasm ahead of its upcoming inclusion into the Nasdaq-100 index, which is tracked by the popular Invesco QQQ Trust ETF. The retailer led a gain in the consumer group, which could be getting an overall lift from Trump's push to lower credit card rates, as well as oil prices, ahead of the U.S. midterm elections later this year.
Palantir rose 1% on an upgrade from Citi, leading a gain in some tech stocks. AMD and Oracle were also higher.
— CNBC's Liz Napolitano contributed reporting
