Markets Edge Higher Despite Fed Drama

Markets ended modestly higher Monday, overcoming early jitters tied to escalating tensions between the Trump administration and the Federal Reserve. The S&P 500 and Dow notched fresh record closes, driven by resilience in tech and optimism around AI partnerships, even as a controversial push to cap credit card interest rates pressured bank stocks. A Department of Justice probe into Fed Chair Powell injected fresh uncertainty, but the broader market appeared to discount the long-term risks, at least for now. Gold and silver surged to record highs, reflecting lingering unease beneath the surface. With inflation data and bank earnings due this week, investor attention is shifting toward fundamentals.

Key Headlines & Market Movers:

• Fed Independence Questioned Amid DOJ Probe: Concerns over the Federal Reserve's autonomy resurfaced after Chair Powell revealed he had been served grand jury subpoenas tied to past congressional testimony. While no criminal charges have been filed, the development sparked fears of political interference in monetary policy. Despite this, equities recovered as investors viewed the move as more political theater than a substantive threat. Analysts caution, however, that sustained pressure on the Fed could eventually affect market stability and inflation expectations.

Trump Targets Credit Card Rates, Pressures Bank Stocks: President Trump called for a 10% cap on credit card interest rates for one year, leading to a selloff in major credit issuers. Capital One, American Express, and Synchrony saw steep declines, weighing on the KBW Bank Index, which fell nearly 1%. With several large banks set to report earnings later this week, investor focus is shifting to consumer credit trends, margin outlooks, and whether political rhetoric could translate into actionable policy.

• AI Partnerships Propel Tech Giants: Alphabet hit a $4 trillion market cap following news that Apple will integrate Google’s Gemini AI into Siri. Walmart also jumped on the AI bandwagon, announcing a Gemini-powered shopping assistant to enhance customer experience. These developments underscored growing investor enthusiasm for tangible AI implementation, pushing megacaps higher despite broader market caution.

Gold, Silver Surge on Haven Demand: Gold and silver futures soared to record highs amid geopolitical noise and concerns about central bank credibility. Gold settled around $4,610 an ounce, up nearly 2.5%, while silver surged more than 7%. The rally reflects underlying demand for safe-haven assets as investors navigate an increasingly complex political and macro landscape.

S&P 500 Sector Performance

Looking Ahead

Markets appear to be taking the Fed drama in stride, but the risk of continued political interference remains a potential overhang. Focus is now turning to inflation data and the kickoff of Q4 earnings season, with big banks under the microscope. Strong earnings guidance and signs of consumer health could reinforce the bullish narrative, but any missteps could introduce volatility. With sentiment still elevated, the coming weeks will test whether fundamentals can carry the rally into the next leg.

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