US stock market shows muted response to Powell’s resignation rumors amid Trump’s shifting policies

Reuters says that investors have become largely unfazed by headlines surrounding US administration actions, given their erratic nature. Wednesday’s rumors about a possible removal of Federal Reserve Chair Jerome Powell caused only a brief stir in the markets. The S&P 500 and the dollar temporarily dropped by 0.7% and 0.9%, respectively. However, they both quickly recovered after President Donald Trump denied the reports.

Some traders believe Trump was deliberately testing market reaction with these rumors. The White House declined to comment on the speculation, while reaffirming there are no plans to replace Powell.

The S&P 500's moderate volatility partly reflects investor expectations that potential Fed chair changes could accelerate rate cuts. From their perspective, such a scenario could boost corporate earnings. However, as Macquarie's Thierry Wizman warns, undermining the central bank's independence creates risks of weakening confidence in the dollar and reigniting concerns about the US stock market's investment appeal.