Trump rattled the Fed, but... Indices rise on Nvidia expectations [New York Stock Briefing]

The three major stock indices on the New York Stock Exchange rose slightly. Donald Trump, the former US president, attempted to dismiss Lisa Cook, a member of the Fed Board, but Cook countered with legal action, putting the brakes on Trump’s attempt to control the Fed. As a result, concerns over the Fed's independence eased and investor attention shifted toward Nvidia’s earnings.

On the 26th (local time), at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 45,418.07, up 135.6 points (0.3%) from the previous session. The S&P 500 gained 26.62 points (0.41%) to finish at 6,465.95, and the NASDAQ Composite Index closed at 21,544.27, up 94.98 points (0.44%).

Suh Sang-young, a researcher at Mirae Asset Securities, said, "Early in the session, the dismissal of a Fed board member and political instability in France led to some declines amid changing market conditions, but as the session progressed, investors focused on the semiconductor and AI industries rather than news about Cook. This helped index gains despite a wait-and-see mood during the day, mainly owing to expectations for Nvidia’s earnings."

After a cabinet meeting that day, Trump told reporters regarding the dismissal notice sent to Cook, "We are reviewing some very excellent people for that position and have narrowed it down to several candidates. Once we appoint someone new as Cook’s successor and secure a majority on the Fed Board (FRB), everything will go well."

He laid bare his intention to control the Fed.

Previously, Trump had published Cook’s dismissal notice on his Truth Social account the night before, stating that he would remove her for allegedly using a mortgage loan improperly.

This news dampened investor sentiment. US stock index futures saw expanded losses briefly in Asian trading. The move to dismiss Cook was viewed as an attempt to take control of the Fed Board and, ultimately, as a threat to its independence.

However, as Cook responded to Trump's dismissal notice by saying, "There is no legal basis, and he does not have such authority," and launched a legal response, the market breathed a sigh of relief.

The prospect that legal wrangling could thwart Trump's effort and safeguard the Fed's independence was seen as encouraging. The Fed also issued a statement indirectly supporting Cook.

A Fed spokesperson said, "The Fed will comply with all court decisions," adding, "According to the Federal Reserve Act, Fed board members are appointed to long fixed terms and the president can only remove a member 'for cause' as stipulated by Congress."

Investors are now turning their eyes toward Nvidia’s second-quarter earnings, which will be announced after the close on the 27th. Amid a growing debate about a bubble in the AI industry, Nvidia's results will act as a barometer for the market.

More than the results themselves, investors are expected to focus on the outlook and the underlying rationale behind guidance.

Anthony Saglimbene, chief market strategist at Ameriprise, said, "Nvidia’s results are likely to be positive," adding, "How Nvidia achieves and meets these already very high expectations, and whether it raises the bar further, will influence the market."

Among the large tech companies with a market capitalization above $1 trillion, Nvidia, Broadcom, and Tesla each rose more than 1%.

JPMorgan also gained more than 1%, solidly holding a market cap of $800 billion.

Min-kyung Shin, Hankyung.com journalist radio@hankyung.com