US Stock Market Decline Widens as Trump Pressures Powell Again

Stocks, Bonds, and Dollar Fall Simultaneously Due to Fed Instability

Trump Again Criticizes Powell, Pressures for Rate Cut

The US stock market plummeted on the 21st (local time) due to Trump's continued pressure on Jerome Powell, the chairman of the US Federal Reserve Board (FED). US Treasury bonds and the dollar also fell simultaneously.

At around 10:15 AM Eastern Standard Time, the Dow Jones Industrial Average fell by 1.9%. The S&P 500 index fell by 2.1%, and the Nasdaq Composite index fell by 2.6%. The three major indices, except for Nasdaq, started with a decline of less than 1% at the opening.

The widening decline was due to President Trump criticizing Powell on his social media after the market opened, again demanding a rate cut. Trump attempted to shift the blame for the economic slowdown to the Fed by saying that the US economy would slow down if rates were not cut.

As US Treasury bond sales resumed, bond prices also fell. The yield on the 10-year US Treasury bond rose by 5 basis points (1bp=0.01%) to 4.38%. Bond prices and yields move in opposite directions.

On this day, the US dollar fell against all major currencies. The dollar index fell by more than 1% to 98.13. Gold prices exceeded $3,400 per ounce, reaching an all-time high.

Nvidia, which fell by 6% last week due to the Trump administration's export restrictions on H20 GPUs to China, fell again by 5.3% to trade at $96.

Tesla, which is set to announce its earnings this week, fell sharply by 7.2% to trade at $223. Dan Ives of Wedbush Securities, known as the most favorable analyst for Tesla, pointed out that Tesla is in a 'code red situation' and that Elon Musk should immediately step down from the Department of Government Efficiency (DOGE).

Last week, Trump hinted at Powell's dismissal after criticizing him the day after Powell expressed concern that "the imposition of tariffs could make it difficult for the Fed to curb inflation and promote economic growth." Subsequently, Kevin Hassett, the White House economic advisor, stated that the president was considering dismissing Chairman Powell.

Krishna Guha, vice president of Evercore ISI, said on CNBC that "if Trump tries to fire Powell, it will trigger a sharp sell-off in the US stock market." He said, "If there is an attempt to dismiss the Fed chairman, interest rates will rise, the dollar will fall, and stocks will be sold off," adding, "I can't believe the US government is trying to achieve that."

Over the weekend, Chicago Federal Reserve Bank President Austan Goolsbee said in a CBS interview that economic activity in the US could plummet by summer due to tariffs. This followed Fed Chairman Jerome Powell's expression of concern that the imposition of tariffs by the president could create difficulties in curbing inflation and promoting economic growth.

Adam Crisafulli of Vital Knowledge pointed out that "President Trump has added a new macroeconomic instability factor to the market by threatening the independence of the US Fed." He said, "Chairman Powell and his colleagues have no choice but to maintain a wait-and-see stance due to the possibility of a sharp rise in inflation caused by tariffs in the coming months."

Crisafulli said, "The simultaneous plunge in US stocks, the US dollar, and US Treasury bonds suggests that Trump's trade war and threats to the Fed have started to trigger capital outflows from US financial assets."

There was no news of progress in trade negotiations over the weekend. Tensions with China escalated as China threatened to retaliate against any negotiations with the US that could harm China.

Guest reporter Kim Jung-ah kja@hankyung.com