Stocks Jump Amid Explosive White House-Fed Feud—Is Your Portfolio at Risk?

NEW YORK -- Wall Street reached new highs on Monday as it rebounded from previous losses, despite ongoing tensions between the White House and the Federal Reserve. Experts caution that this escalating feud could have implications for inflation moving forward. The S&P 500 climbed 0.2% to extend its all-time high hit on Friday. The Dow Jones Industrial Average recovered an initial loss of nearly 500 points to gain 86 points, or 0.2%, while the Nasdaq composite rose by 0.3%.

Nevertheless, some anxiety persisted in the market, primarily due to concerns that the Fed may be losing its independence in determining interest rates necessary to control inflation. As a result, prices for safe-haven assets like gold increased, and the value of the U.S. dollar dropped against other currencies.

Walmart played a significant role in boosting the stock market, with its shares climbing 3% after it was announced that the retail giant would be included in the widely followed Nasdaq 100 index. Additionally, Google, whose parent company is Alphabet, reported on Sunday that it would expand shopping features in its AI chatbot by partnering with Walmart and other major retailers. Following this news, Alphabet's stock rose 1%, pushing its market value above $4 trillion.

These gains helped counterbalance losses from a majority of stocks within the S&P 500, particularly in the credit card sector. Notably, shares of Synchrony Financial fell 8.4%, Capital One Financial dropped 6.4%, and American Express decreased by 4.3% after President Donald Trump proposed capping credit card interest rates at 10% for one year, threatening their profit margins.

A more pressing issue affecting the markets was the ongoing conflict between the Federal Reserve and the Trump administration. Over the weekend, Fed Chair Jerome Powell disclosed that the U.S. Department of Justice had subpoenaed the Fed and threatened criminal charges over his testimony regarding renovations at the Fed's headquarters. In an unusual video statement, Powell characterized his testimony and the renovations as "pretexts" for the threat of criminal charges, asserting that this situation was a direct result of the Fed's decision-making being rooted in public service rather than aligning with the President's preferences.

The Fed has historically operated independently from political pressures, allowing it to make decisions that may not always be favorable to current politicians but are deemed necessary for long-term economic health. This autonomy is crucial, especially during times of high inflation, as it empowers the Fed to raise interest rates even if it may slow down the economy.

Amid these tensions, the yield on the 10-year Treasury bond briefly increased from 4.18% to 4.21%, reflecting worries that a less independent Fed could exacerbate inflation in the long term. Though it later eased back to 4.18%, the concerns also influenced the U.S. dollar, which fell 0.4% against the euro and 0.6% against the Swiss franc.

Despite the prevailing uncertainties surrounding the Fed's independence, analysts suggested that financial markets appeared to overlook these issues for several reasons. Thierry Wizman, a strategist at Macquarie Group, noted that there may be limits to the White House's influence, particularly if Congress opts not to confirm any Fed nominees put forth by the administration.

In contrast, retail stocks experienced a decline, with Abercrombie & Fitch plummeting 17.7% after offering a profit forecast for the final quarter of 2025 that fell short of analysts' expectations. Other mall-based retailers faced similar struggles, including Urban Outfitters, which saw a drop of 12.3%, and American Eagle Outfitters, which fell 3.5%.

Overall, the S&P 500 rose 10.99 points to 6,977.27, the Dow Jones increased by 86.13 to 49,590.20, and the Nasdaq composite gained 62.56 to reach 23,733.90. Meanwhile, the price of gold surged by 2.5% to reach a record settlement of $4,614.70 per ounce.

Looking beyond U.S. borders, stock markets abroad displayed mixed results. In Europe, indexes varied, while Asian markets saw positive momentum, with stocks in Hong Kong gaining 1.4% and those in Shanghai climbing 1.1% following reports that Chinese leaders were preparing additional economic support.