The S&P 500 closed higher on Tuesday as Wall Street focused on factors beyond President Donald Trump’s removal of Federal Reserve Governor Lisa Cook from the central bank’s board, while anticipating quarterly figures from chip giant Nvidia. The broad market S&P 500 concluded the session with an increase of 0.41%, reaching a level of 6,465.94. The tech-heavy Nasdaq Composite increased by 0.44%, concluding the day at 21,544.27. The blue-chip Dow Jones Industrial Average increased by 135.60 points, representing a 0.30% rise, concluding at 45,418.07.
Long-term Treasury yields increased following the Trump decision, whereas short-term yields fell as investors adjusted the yield curve, anticipating that rates may decrease in the near term but ultimately rise as a politicized Federal Reserve becomes less focused on inflation. The U.S. dollar index, which assesses the performance of the greenback relative to a selection of significant currencies, recorded a decline of 0.2% in its most recent update.
Cook intends to initiate legal proceedings contesting her dismissal by the president, according to her attorney. The Federal Reserve stated it “will abide by any court decision” on the matter. n “President Trump has no authority to remove Federal Reserve Governor Lisa Cook,” stated lawyer Abbe Lowell. “The endeavor to terminate her employment, predicated exclusively on a referral letter, is devoid of any factual or legal foundation.” Trump’s unprecedented action intensifies the pressure the president has been exerting on the central bank’s autonomy. Legally, a president is permitted to dismiss a Fed governor solely “for cause.”
The Federal Reserve’s board currently comprises six members, with one position unfilled following the resignation of Adriana Kugler earlier this month. The removal of Cook would result in a board comprising five members, with non-Trump appointees maintaining a majority position. Should Stephen Miran be appointed to the Kugler vacancy and the president successfully oust Cook, this would result in a 4-3 majority for Trump. If Fed Chair Jerome Powell voluntarily vacates his position upon the expiration of his term in May, it would provide the president with an additional vote.
Investors have shown optimism regarding the potential for reduced interest rates in September, a possibility suggested by Powell during his remarks last week in Jackson Hole, Wyoming. Investors are also anticipating Nvidia’s earnings report on Wednesday, which has the potential to support the megacap tech sector after its recent decline. The “Magnificent Seven” stocks experienced a rally on Friday, following a sequence of five consecutive days of losses. “In the immediate term, markets will likely move past the Cook news swiftly (assuming this is a singular event and Trump refrains from attempting to dismiss Powell), redirecting focus to Nvidia, the PCE, and employment figures. However, the independence of the Fed is undoubtedly being compromised, a trend that carries adverse long-term implications,” stated Adam Crisafulli, founder of Vital Knowledge.
Additionally influencing sentiment, Trump stated on Monday his intention to impose “substantial” new tariffs alongside export restrictions on chips directed at countries that fail to eliminate digital taxes. Sentiment remained restrained, influenced by the expectation of Nvidia’s earnings report set to be released after the market closes on Wednesday. Ameriprise Chief Market Strategist Anthony Saglimbene anticipates that the results will be “good.”
“It all comes down to execution,” Saglimbene stated in an interview with CNBC. “How will Nvidia manage to meet and fulfill what I perceive to be quite high expectations at this moment?” Do they provide upward guidance? Do they provide guidance that exceeds market expectations? These factors are likely to shape the market’s response. Shares of the artificial intelligence chip darling experienced an increase of approximately 1% on Tuesday, continuing the significant gains observed in the previous two sessions.