US Markets Slip as DOJ Investigation Raises Fed Independence Concerns

Over the weekend, the US Department of Justice launched a criminal investigation into Fed Chair Powell related to renovation expenses at the Fed’s headquarters. Investors appear to be interpreting this as a move by the White House that could reduce the independence of the US central bank, weighing on confidence in the country.

President Trump also announced his intention to put a 10% cap on credit card interest rates for one year. Credit card companies are being hit hard premarket, including losses of 7.8% for Capital One and 4.4% for American Express. US banks are also under pressure this morning, including losses of 4.0% for Citigroup* and 2.6% for JPMorgan Chase. Investment banks and Canadian banks appear less impacted so far, trading close to flat in premarket activity.

Giving back Friday’s gains, US index futures are down 0.6% to 0.8% this morning. The US Dollar is also selling off on the news, enabling the Euro, Loonie, Pound, and Aussie to gain 0.2% to 0.5%. Precious metals are soaring amid increased political uncertainty, with Gold up 2.0% and Silver up 6.0%, trading above $80.00/oz. Copper is up 2.0%, trading above $6.00/lb, while Crude Oil is steady.

Earnings season for US banks kicks off tomorrow with JPMorgan, followed by Bank of America, Citigroup, and Wells Fargo on Wednesday, and then Goldman Sachs* and Morgan Stanley* on Thursday. It is also a busy week for economic news, headlined by US consumer prices tomorrow and US retail sales on Wednesday.

*Shares of Citigroup, Goldman Sachs, and Morgan Stanley are held in some portfolios managed by SIA Wealth Management.

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