Wall Street rattled: Dow falls, gold hits record high amid Powell investigation fears

US stocks slipped on January 12 after the Justice Department opened a criminal investigation into Federal Reserve Chair Jerome Powell, marking an apparent escalation in President Donald Trump’s efforts to pressure the central bank and raising fresh concerns over Fed independence. 

The Dow Jones Industrial Average fell 252 points, or 0.5% in the early morning trade. The S&P 500 declined 0.2%, while the Nasdaq Composite also ended about 0.2% lower. 

Market sentiment was already fragile after Trump floated a proposal to cap credit card interest rates at 10% for one year. While the move is aimed at easing consumer affordability pressures, critics warn it could curb lending activity, squeeze bank profitability and ultimately hurt consumers. 

Banking stocks bore the brunt of the selling in early trade. Citigroup slid nearly 3%, JPMorgan Chase and Bank of America fell more than 1% each, while Capital One plunged 6%. 

The sell-off intensified after Powell confirmed in an unusual direct video statement on January 11 evening that federal prosecutors had opened a criminal investigation linked to his testimony before the Senate Banking Committee regarding the renovation of Federal Reserve office buildings. 

Powell described the probe as another attempt by Trump to influence monetary policy and said he would not yield to political pressure. His term as Fed chair is set to expire in May. The Federal Reserve is widely expected to hold interest rates steady at its meeting later this month as policymakers assess inflation trends and the broader economic outlook. Trump, however, has repeatedly pushed for faster rate cuts. 

Meanwhile, gold prices also surged as investors sought safe-haven assets amid fears of eroding Fed independence. Gold futures jumped 2%, with spot gold hitting a fresh record above $4,600 an ounce for the first time before trimming gains slightly, according to LSEG data. Prices are up about 6% so far this year. 

Former Federal Reserve Chair Janet Yellen sharply criticised the investigation, calling it a threat to the central bank’s autonomy. Yellen, who later served as US Treasury secretary, said the situation was “extremely chilling” and warned that financial markets should be deeply concerned.