U.S. financial markets edged higher on Tuesday, with investors shrugging off immediate concerns over President Trump’s decision to remove Lisa Cook from the Federal Reserve’s Board of Governors, an unprecedented move that analysts say could hinder the central bank’s independence.
The S&P 500 gained 26 points, or 0.4%, to close at 6,466, while the Dow Jones industrial Average climbed 135 points, or 0.3%. The tech-heavy Nasdaq Composite added 95 points, or 0.5%.
The muted reaction in the U.S. contrasted with sharp declines on global markets, as investors digested news of a potential Fed shakeup that could reshape the composition of the Board of Governors.
Mr. Trump made his announcement in a letter posted on Truth Social on Monday evening, accusing Cook of mortgage fraud. The president said the move was “effective immediately.”
Mr. Trump was repeating allegations against Cook first leveled earlier this month by Federal Housing Finance Agency Director Bill Pulte. The senior housing official, who runs the agency that regulates mortgage giants Fannie Mae and Freddie Mac, alleged earlier this week that Cook falsified bank and property records to “obtain more favorable loan terms.”
“I have determined that there is sufficient cause to remove you from your position,” Mr. Trump wrote on Monday in the letter addressed to Cook. The president had previously called on the Fed official to resign.
Cook responded to the Monday post with a statement saying that Mr. Trump has no authority to fire her and that she will not resign, setting up a potential legal showdown that will test the president’s authority to fire a member of the central bank. Under the Federal Reserve Act, the president can only remove a Fed official “for cause.” Fed board members serve for 14-year terms.
Mr. Trump “purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so. I will not resign. I will continue to carry out my duties to help the American economy as I have been doing since 2022,” Cook said in a statement.
Meanwhile, U.S. Treasury yields were mixed, with longer-term yields rising and lower-term yields edging lower.
While Mr. Trump’s move to fire Cook could be a source of unease for investors, it did not appear to shake their faith in a September rate cut. Traders put the probability of a 0.25% rate cut at 90%, according to data from CME Group.
Ulrike Hoffmann-Burchardi, CIO Americas and global head of equities at UBS Global Wealth Management expects the Fed to lower rates by a total of 1 percentage point over the central bank’s next four meetings.
During a speech last week at the Jackson Hole, Wyoming economic forum Fed Chair Jerome Powell signaled a rate cut could be on the horizon. The Fed will “proceed carefully,” he said, but added that the shifting balance of risks “may warrant adjusting our policy stance.”
The Associated Press
contributed to this report.
Mary Cunningham is a reporter for CBS MoneyWatch. Before joining the business and finance vertical, she worked at “60 Minutes,” CBSNews.com and CBS News 24/7 as part of the CBS News Associate Program.
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