Bank stocks slide as trump credit cap and fed turmoil rattle financial sector
Gold jumped to a record as US stocks hit fresh highs, even as the Department of Justice launched a criminal investigation into US Federal Reserve Chair Jerome Powell and political pressure on the central bank escalated, according to CNBC.
The S&P 500 rose 0.16 percent to 6,977.27 and the Dow Jones Industrial Average gained 0.17 percent to 49,590.20, both setting new closing and intraday records.
The Nasdaq Composite added 0.26 percent to 23,733.90, helped by Walmart, which recently moved its listing to the Nasdaq, according to Reuters. The Russell 2000 also reached an all-time high, said CNBC.
Powell confirmed in a rare direct video statement that federal prosecutors have opened a criminal investigation tied to his Senate Banking Committee testimony on Fed office renovations.
He called it another attempt by US President Donald Trump to influence monetary policy, with his term ending in May.
Reuters said Powell delivered “an unusually full-throated rejection” of grand jury subpoenas, while Morgan Stanley described a “cacophony of market-moving events” early in 2026.
Despite that backdrop, some market strategists see limited near-term policy impact.
Jim Lebenthal of Cerity Partners told CNBC that the investigation is a “long-term impact,” not something that will change interest rates or inflation in the short term.
He pointed to expectations for “pretty good” earnings, the chance of CPI coming in “well below 3 percent,” and an economy “growing rapidly” as key supports for equities.
The stress around Fed independence is surfacing in asset prices.
Gold futures, viewed as a hedge against diminished central bank independence, climbed 2.5 percent to a record close of US$4,614.7, according to CNBC, while spot gold briefly traded above US$4,600 before ending 1.84 percent higher at US$4,592.55, said Reuters.
The US dollar index fell 0.34 percent to 98.90 as the euro rose to US$1.1666, Reuters reported, with Marc Chandler of Bannockburn Global Forex saying the subpoenas “ended the dollar’s New Year bounce.”
US 10‑year Treasury yields edged up to 4.189 percent.
Financials were the main losers.
Trump’s call for a one-year cap on credit card interest rates at 10 percent starting January 20 hit bank and card stocks, as per CNBC.
Citigroup fell about 3 percent, JPMorgan and Bank of America dropped more than 1 percent, and Capital One slid 6 percent.
Reuters added that American Express and other consumer finance names also declined, with JPMorgan analysts estimating Citi and US Bancorp face the biggest earnings impact.
Near term, investors are watching the next US CPI print and the start of bank earnings season, with JPMorgan, Bank of America, Citigroup, and Morgan Stanley due to report this week, according to CNBC.
