The S&P 500 Index finished within striking distance of all-time highs after whipsawing on whether President Donald Trump will fire Federal Reserve Chair Jerome Powell.
On Wednesday, the benchmark equities gauge rose 0.3%, after briefly declining as much as 0.7% in New York initially on the heels of the news, leaving it less than 0.2% from a fresh all-time high. Health care and real estate sectors — areas where companies tend to have comparatively low valuations and offer robust dividends — led the advance while energy shares lagged. Meanwhile, the Nasdaq 100 Index rose 0.1% to a fresh record, after sliding as much as 0.9% earlier.
Trump denied he is seeking to remove Powell, after raising the idea in a closed-door meeting with congressional Republicans that leaked to the media. Analysts have warned that if Trump were to follow through on ousting Powell it would roil financial markets. But the reaction on Wednesday was muted. Powell has maintained that a president has no legal authority to fire or demote those in leadership positions at the Fed.
“The markets are taking this as a credible threat,” said Joe Gilbert, portfolio manager at Integrity Asset Management. “This is unsettling and it remains to be seen if this is just a trial balloon by Trump to gauge market sentiment if indeed he follows through with firing Powell. Ultimately, we believe the legal hurdles will be too substantial to remove Powell.”
Broader technology gains were kept in check as US-listed shares of ASML Holding NV dropped 8.3% after the chip equipment maker struck a more cautious tone about growth outlook next year. The Philadelphia Semiconductor Index, which houses Nvidia Corp., Advanced Micro Devices Inc. and Micron Technology Inc., dipped 0.4%.
Among big banks, Goldman Sachs Group Inc. rose 0.9% after the firm’s stock traders posted the largest revenue haul in Wall Street history. Bank of America Corp. slipped 0.3% even as traders posted a record second quarter, reaping the benefits of volatile markets. And while Morgan Stanley’s stock traders scored their best second quarter on record, shares dropped 1.3%.
The KBW Bank Index, which measures the performance of big lenders including JPMorgan Chase & Co. and Citigroup Inc., steadied by rising 0.3% on the heels of its worst session in nearly two months a day earlier. The S&P 500 slumped on Tuesday after the latest update on consumer prices tempered Wall Street’s hopes for lower interest rates soon.
US stocks also got a boost after wholesale inflation was little changed in June, with investors keen to parse corporate earnings for further details of the impact of Trump’s tariffs.
US economic activity “increased slightly” between late May and early July, the Fed said in its Beige Book survey of regional business contacts. Cleveland Fed President Beth Hammack said she wants to see inflation lowered further before she’d support a cut in interest rates.
Among trade developments, Trump said he was likely to impose tariffs on pharmaceuticals as soon as the end of the month and that levies on chips could come soon as well. UBS strategists said US equity investors are complacent in their view that tariffs are predominantly a negotiation tool. They put their S&P 500 year-end target of 5,300 points under review.
Of note, Johnson & Johnson advanced 6.2% after the pharmaceutical company boosted its sales forecast for the full year. Meantime, Brighthouse Financial Inc. jumped 6.2% after the Wall Street Journal said Aquarian is in exclusive talks to buy the provider of annuities and life insurance, citing people familiar.
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