- U.S. stocks finished at or near record highs as investors largely looked past political turmoil around the Fed.
- The DOJ opened a criminal probe into Fed Chair Jerome Powell, reviving market concerns about central-bank independence and future rate policy.
- Trump’s proposed one-year 10% cap on credit card interest rates sent card-focused bank stocks sharply lower on margin and credit-risk fears.
- Gold and other havens jumped while the dollar slipped, reflecting a hedge against rising policy and regulatory uncertainty.
Read More
On January 12, 2026, U.S. equity markets attained a paradoxical mix of euphoria and tension: major indices closed at record highs while undergoing intraday turmoil driven by political developments. The S&P 500 rose to 6,977.27, the Dow to 49,590.20, and the Nasdaq ended at 23,733.90. This suggests strong investor demand, perhaps underpinned by optimism around economic data and assumptions of manageable inflation, even as geopolitical and regulatory risks are being newly priced in.
A prime source of market unease was the Department of Justice’s opening of a criminal investigation into Fed Chair Jerome Powell, focusing on his June 2025 testimony and a $2.5 billion renovation project for the Fed’s headquarters. Powell characterized the probe as politically motivated—triggered by his resistance to accelerating rate cuts—and warned of its implications for central bank autonomy. Analysts contended that while a successful prosecution seems unlikely, the investigation alone increases risk perception around monetary policy and could pressure Powell’s successors or more compliant governors toward dovish action.
Financial institutions—with heavy credit card portfolio exposure—were acutely impacted by President Trump’s proposal to cap credit card interest rates at 10 % for one year starting January 20. Stocks like Synchrony, Capital One, and Citigroup dropped steeply, reflecting fears of squeezed net interest margins, amplified credit risk, and underwriting pullbacks especially in subprime and store-card segments. Analysts warned that implementing such a regimented cap could force reductions in lending, fees, rewards programs, or otherwise restructure consumer financing.
In contrast, safe-haven assets rallied. Gold broke above $4,600 per ounce, silver followed, and the U.S. dollar weakened noticeably. These moves signal investor concern over political interference in monetary policy and represent a rotation toward assets seen as defensive in the face of regulatory risk and policy uncertainty.
Strategic implications for investors include: assessing duration risk (especially given political pressure on rate setters), repricing financial sector exposure particularly credit card-heavy banks; monitoring central bank supply and personnel changes; and watching legislative or judicial outcomes related to rate-caps. Open questions remain around whether the DOJ probe will lead to any enforcement actions, whether the rate cap has a realistic legal path, and how markets will react if inflation or economic data contradicts dovish expectations.
Supporting Notes
- The S&P 500 closed at 6,977.27 (up 0.16 %), the Dow at 49,590.20 (up 86.13 points or 0.17 %), and Nasdaq at 23,733.90 (up ~0.26 %); all three closed at or near record highs.
- Jerome Powell is under criminal investigation by the DOJ over his 2025 congressional testimony and related to the Fed’s $2.5 billion renovation project.
- Trump proposed a one-year, 10 % cap on credit card interest rates starting January 20, 2026.
- Bank stocks fell sharply: Synchrony by ~10 %, Capital One by ~6–7 %, while institutions like Citigroup, JPMorgan Chase, and American Express also declined significantly.
- Gold surged to a record above $4,600 per ounce, silver also reached new highs; dollar index dropped about 0.2-0.3 %.
- Independence of the Fed has been questioned by markets and analysts; dollar weakness and safe-asset demand highlight fears of political interference.
- Concerns were raised that a rate cap could restrict access to credit for subprime borrowers, force banks to reduce rewards or tighten underwriting.