NEW YORK: The S&P 500 and Nasdaq were headed toward record highs on Thursday, as President Donald Trump’s growing frustration with the Federal Reserve’s wait-and-watch stance on cutting interest rates fueled bets of more monetary policy easing ahead.
A Wall Street Journal report said Trump has mulled picking Federal Reserve Chair Jerome Powell’s replacement early, by September or October, after repeatedly criticizing him for not cutting interest rates sooner.
Traders now price in a nearly 25% chance of the Fed cutting rates in July, compared with 12.5% last week, according to CME Group’s FedWatch tool.
Some analysts see Trump’s musings about firing Powell or naming a successor early as an effort to influence monetary policy through a “shadow” Fed chair even before Powell leaves office in May 2026.
However, Chicago Fed President Austan Goolsbee said on Wednesday Trump naming Powell’s replacement would not influence monetary policy from outside the central bank.
“We know that Trump doesn’t want Powell there. He doesn’t like what Powell’s doing. But whether the new guy comes or not, whoever it is, they still have a dual mandate. It doesn’t change the Fed’s job,” said Adam Sarhan, chief executive of 50 Park Investments.
The benchmark S&P 500 was trading 0.2% below its record peak, while the tech-heavy Nasdaq was about 0.5% below its all-time highs, with risk appetite revived by a truce in the Middle East conflict earlier this week.
The Nasdaq 100 - a subset of the Nasdaq composite index - touched an intraday record high.
Economic data was mixed. The final reading from the US Commerce Department showed gross domestic product contracted 0.5% in the first quarter. Economists polled by Reuters had forecast a 0.2% contraction.
Separately, a report for weekly jobless claims showed the number of Americans filing new applications for jobless benefits fell last week.
San Francisco Fed President Mary Daly said she’s seeing increasing evidence that tariffs may not lead to a large or sustained inflation surge, helping bolster the case for a rate cut in the fall, Bloomberg News reported.
Meanwhile, Richmond Fed President Thomas Barkin remarked tariffs are very likely to push inflation up over the coming months.
The Personal Consumption Expenditures report on Friday - the Fed’s preferred gauge of inflation - will be scrutinized to ascertain tariff-induced price changes in the US economy.