Stock futures were mostly higher early Thursday as the market continued to shake off fears that President Donald Trump could fire Federal Reserve Chair Jerome Powell.
Futures on the Dow Jones Industrial Average slipped 54 points, or 0.1%, ahead of the open but S&P 500 futures and Nasdaq 100 futures were each up 0.1%. All three major indexes closed higher Wednesday–and the Nasdaq clinched a new record–despite a sharp move lower in the middle of the day following a report that Trump was likely to fire Powell.
The president then backtracked. “I don’t rule anything out, but I think it’s highly unlikely, unless he has to leave for fraud,” he told reporters in the Oval Office.
Those comments soothed the market’s concerns and the U.S. dollar, which initially fell close to 1%, rebounded. The U.S. dollar index did still snap its eight-day winning streak, though, as it failed to completely erase its losses. The threat to Fed independence remains a major risk for the greenback.
While markets swiftly–and mostly–recovered, the reaction is a warning of the potential impact of Powell’s dismissal.
“Any formal move against Fed Chair Powell could fuel significant volatility across global markets, impacting Treasury yields, the dollar and broader financial stability due to the importance of central bank independence to investor confidence and risk appetite,” DHF Capital chief commercial officer Erik Boekel wrote Thursday.
The yield on the 30-year Treasury note moved higher again to 5.046% Thursday, after spiking yesterday before slipping back. In contrast, the two-year yield dropped as investors reasoned that Powell’s successor may be more likely to cut rates–however, the yield moved back up Thursday morning.
