Major United States averages closed modestly higher on Tuesday (Wednesday AEST) as investors largely looked past President Donald Trump’s unprecedented removal of Federal Reserve Governor Lisa Cook and instead focused on upcoming results from chipmaker Nvidia.
The Dow Jones Industrial Average gained 135.6 points, or 0.3%, to end at 45,418.1. The S&P 500 rose 26.6 points, or 0.4%, to 6,465.9, while the Nasdaq Composite advanced 95 points, or 0.4%, to 21,544.3. The US dollar index slipped 0.2% against a basket of major currencies.
Cook intends to contest her dismissal in court. “President Trump has no authority to remove Federal Reserve Governor Lisa Cook,” her lawyer Abbe Lowell said. “His attempt to fire her, based solely on a referral letter, lacks any factual or legal basis.” The Fed responded that it “will abide by any court decision.”
By statute, a president may only remove a Fed governor “for cause”, making Trump’s move highly unusual.
If successful, it could shift the balance of the Fed board. There are currently six members, with one vacancy following Adriana Kugler’s resignation earlier this month.
Should Cook’s removal stand and Trump nominee Stephen Miran be confirmed, the president would secure a 4-3 majority.
Fed Chair Jerome Powell’s term expires in May, and his potential departure could hand Trump an additional seat.
Despite the political turmoil, markets held steady, buoyed by expectations of a September rate cut, a prospect Powell signalled in his Jackson Hole remarks last week.
Traders are also eagerly awaiting Nvidia’s quarterly earnings on Wednesday (Thursday AEST), which could influence the performance of megacap technology stocks.
Adding to geopolitical tensions, Trump said Monday that he intends to impose “substantial” new tariffs and export restrictions on chips targeting countries that refuse to remove digital taxes.
Bond yields eased, with 10-year Treasury rates down 0.3% at 4.265% and 2-year rates down 1.1% at 3.683%.
