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Trump fires Fed Governor Cook (0:25), threatens more tariffs (2:40), and Hassett on Fed chair nominee pick (3:15).
The following is an abridged transcript:
Stock index futures fell on Tuesday, as President Donald Trump fired Federal Reserve Governor Lisa Cook on Monday amid mortgage fraud allegations.
S&P 500 futures (SPX) -0.1%, Nasdaq 100 futures (US100:IND) -0.1%, and Dow futures (INDU) -0.2%.
The 10-year Treasury yield (US10Y) rose 2 basis points to 4.3%. The 2-year yield (US2Y) fell 2 basis points to 3.71%.
Cook’s firing comes amid talks about the Fed’s independence, especially under the Trump administration.
Trump said in a letter posted on his Truth Social platform that he is firing Cook because of allegations that she committed mortgage fraud. Bill Pulte, a Trump appointee to the agency that regulates mortgage giants Fannie Mae and Freddie Mac, made the accusations last week.
“Were Cook’s dismissal to hold, it would open up another seat for Trump to fill on the seven-person Federal Reserve Board. With Stephen Miran nominated for the seat recently vacated by Governor Kugler and with Governors Waller and Bowman dissenting in favor of a rate cut at the July meeting, this would increase the prospects of a dovish majority on the Board,” Deutsche Bank’s Peter Sidorov said.
With Trump’s move seen as further escalating the U.S. administration’s attempts to exert influence over the Fed, the dollar saw a knee-jerk drop of nearly -0.4% on the news, though it has largely reversed this decline as I type, Sidorov added.
“Trump issued a letter purporting to fire Cook—an unprecedented action. After recent comments, investors will inevitably view this as an assault on Fed independence,” UBS’ Paul Donovan said.
While most U.S. voters have only a hazy understanding of what the Fed is, it is a convenient scapegoat for economic weakness. Challenging Fed independence will have negative economic consequences, Donovan added.
Wall Street finished lower on Monday, retreating after a mostly mixed session. The pullback followed Friday’s strong rally, which had lifted the Dow to a record close after Fed Chair Jerome Powell’s remarks at Jackson Hole.
On the economic calendar for the day, the July Durable Goods Orders will land before the opening bell and are expected to show a decrease of 4% on the month, with aircraft orders the swing factor for another month.
The Case-Shiller Home Price Index and the June FHFA House Price Index will also be released before the opening bell. Home prices are seen up 2.6% on the year in June. The latter is expected to come in at -0.1% M/M.
The August Consumer Confidence report will land during market hours and is forecasted to come in at 96.4.
U.S. President Donald Trump on Monday threatened to “impose substantial additional Tariffs” and “impose export restrictions on selling tech and chips” to countries with digital taxes.
Many countries, particularly in Europe, have implemented DSTs targeting U.S. tech giants as DST levies tax on gross revenue rather than net profits, disproportionately burdening firms like Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOG), Amazon (NASDAQ:AMZN) and Meta Platforms (NASDAQ:META). Trump views these taxes as discriminating against American tech, as they give a complete pass to Chinese tech firms.
Kevin Hassett, director of the National Economic Council and a potential nominee to replace Federal Reserve Chair Jerome Powell, expects President Donald Trump to name the next head of the central bank in “another few months,” he said on Monday during an interview on CNBC.
Treasury Secretary Scott Bessent “is running a thorough search process. There are a number of really excellent candidates being interviewed by him and the president.”
He doesn’t see any chance that Powell’s pivot to being open to a September rate cut would sway President Donald Trump to extend Powell’s term as Fed chair.
On Friday, the head of the U.S. central bank said a shifting balance of risks, i.e., toward labor market weakness, “may warrant adjusting our policy stance.” That indicated the door is open for a rate cut at the Federal Open Market Committee’s September 16-17 meeting.
“The pivot was accurate, was data driven,” he said. “If you look at the trailing six-month inflation rate, it was 1.9%, core is about half a percent higher than that.”
Hassett continued: “Inflation has gone way down. Meanwhile, the economy is looking strong, but not too strong… I think the Fed’s a little bit late to the game, but I think the presentation that Jay Powell made at Jackson Hole was sound.”
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