US stocks swung sharply on Wednesday amid escalating speculation that President Donald Trump was preparing to fire Federal Reserve Chair Jerome Powell.
The move raised alarms about the central bank’s independence and roiled financial markets before the White House came out and denied the media reports.
The S&P 500 briefly fell 0.6% before recovering to close up 0.32% at 6,263.70.
The Nasdaq Composite, which had been down as much as 0.8%, ended higher by 0.25% at 20,730.49, marking its ninth record close of the year.
The Dow Jones Industrial Average also reversed a steep intraday loss to gain 231.49 points, or 0.53%, to 44,254.78, after earlier falling 264 points.
Markets initially tumbled after several outlets, including the New York Times, reported that Trump had told Republican lawmakers he was planning to dismiss Powell.
Trump reportedly had said he “likely will soon” remove Powell from the top Fed post.
However, in a later statement, Trump dialed back the threat, saying it is “highly unlikely” he would take immediate action.
“No, we’re not planning on doing it,” he said, though he also added that he does not “rule out anything.”
Investor unease was evident despite the rebound. For weeks, Trump has been pressuring Powell to slash interest rates, most recently calling for a 300-basis-point cut.
Powell, meanwhile, has publicly said the Fed would have already eased policy if not for inflation pressures created by Trump’s sweeping tariffs.
“In effect, we went on hold when we saw the size of the tariffs and essentially all inflation forecasts for the United States went up materially,” Powell said earlier this month.
Separately, bank earnings offered little support. Despite beating profit estimates, shares of Bank of America, Goldman Sachs, and Morgan Stanley all traded lower, adding to the day’s cautious tone.
Rate cut hopes on the rise
The likelihood of a Federal Reserve rate cut in September has surged, as uncertainty grows over Jerome Powell’s tenure as Fed Chair.
This follows a string of reports suggesting President Donald Trump is actively considering firing Powell, while some reports have suggested that Powell may be weighing resignation.
Trump has denied any such plans.
Market expectations reflect this shift in sentiment.
According to the CME FedWatch tool, traders now assign a 56.1% probability to a rate cut bringing the federal funds target to 400–425 basis points after the September FOMC meeting.
This is 150 basis points higher than yesterday.
Meanwhile, the odds of rates being held steady at the current 425–450 bps range have dropped to 40.4%.
A deeper cut to 375–400 bps is seen as highly unlikely, with just a 1.5% probability.
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