Markets Slide after Powell Says DOJ Probe Targets Federal Reserve Independence

U.S. stocks moved lower before Monday’s open as investors reacted to fresh political and policy tension around the Federal Reserve. Markets slipped after Federal Reserve Chair Jerome Powell said the Department of Justice had served the Fed with grand jury subpoenas. The matter concerns Powell’s prior comments regarding a long-term renovation of the Fed offices. Powell said the probe follows disputes with President Trump over interest rate policy. As a result, investors turned cautious ahead of the new week.

The Justice Department probe into Federal Reserve Chair Jerome Powell creates a new source of worry for markets. Even though the issue relates to past remarks on a building project, investors care more about what it means for Federal Reserve independence. If traders begin to believe that legal pressure could affect rate choices, trust in policy may weaken. As a result, stocks could see more swings, and bond yields may move on fear instead of data. Over time, such doubt can lead investors to remain cautious, even if the broader economy remains stable.

Meanwhile, before the bell, the S&P 500 (SPX) fell about 0.7%. At the same time, the Dow Jones Industrial Average (DJIA) dropped 0.8%, while the Nasdaq (NDX) declined close to 0.9%. This pullback came after a strong Friday, when the Dow and the S&P both closed at record highs.

Fed Tension and Rates in Focus

Later in the day, several Fed officials are scheduled to speak, which could shape expectations. In addition, traders are watching inflation data later this week, including the consumer price index and producer price index. Retail sales data is also scheduled, adding more clues on demand and growth.

Based on current pricing, markets see a 95% chance the Fed keeps rates unchanged at its next meeting. That view follows recent jobs data showing slower hiring but a lower jobless rate.

^{U.S. inflation has eased but remains near the Fed target, with the latest reading at 2.74%. This steady path helps explain why the Fed can wait longer before cutting rates, even as growth begins to slow.}

Banks Slide after Credit Rate Proposal

Meanwhile, bank and card stocks fell after Trump called for a 10% cap on credit card rates. The plan would take effect on Jan. 20 and aims to lower consumer costs.

Shares of JPMorgan Chase & Co. (JPM), Bank of America (BAC), and Citigroup (C) traded lower before the open. Visa (V) and Mastercard (MA) also declined. These moves come just days before major banks report earnings, keeping attention focused on outlooks and margins.