The stock market closed at a fresh record high on Monday as investors bought the dip that was sparked by a new attack on the Federal Reserve’s independence.
Both the S&P 500 index SPX and the Dow Jones Industrial Average DJIA gained 0.2% to finish at record highs of 6,977.32 and 49,590.20, respectively, according to Dow Jones Market Data. The technology-heavy Nasdaq Composite Index COMP gained 0.3%, or just 0.9% below its record close booked in late October.
“We’re firmly in the buy-the-dip camp this year,” Jeffrey Schulze, head of economic and market strategy at ClearBridge Investments, said in an interview. “But it wouldn’t be a surprise to us if you see a 5% to 10% drawdown somewhere throughout this year.”
He added: “When you have market valuations and high expectations, the markets can sell off in a pretty fast capacity.” But that wasn’t the big risk on Monday.
Fed Chair Jerome Powell on Sunday released a video calling a Justice Department threat of a criminal indictment “unprecedented.” The threat relates to his testimony to Congress in June about renovations of historic Federal Reserve office buildings. Powell said Sunday that public service “sometimes requires standing firm in the face of threats” and suggested that the move was about political pressure to influence monetary policy.
The renewed tensions briefly revived the “sell America” theme, according to strategists at JPMorgan, who focused on the dollar and longer-duration Treasury yields.
Yet upward pressure on Treasury yields moderated later in the session, helped by an auction of 3-year BX:TMUBMUSD03Y and 10-year BX:TMUBMUSD10Y notes that were both met with strong demand.
“I think it’s a tug-of-war right now, with folks worried about the ‘bond vigilantes’ and others thinking these are very good entry points in Treasurys over the long term,” Gennadiy Goldberg, head of U.S. rates strategy at TD Securities, said in a phone interview.
While “sell America” might have been a worry of the day, it isn’t “the worry of the year,” Goldberg said. “Foreigners bought more Treasurys than they sold last year,” he said. It’s been more of a “hedge America” trade.
The ICE U.S. Dollar Index DXY, a measure of the greenback against other major currencies, fell 0.2%, according to FactSet data, at last check.
Long-term Treasury yields rose only modestly, with the 10-year Treasury note BX:TMUBMUSD10Y gaining 1.6 basis points to 4.186% as of 3 p.m. Eastern time. That’s slightly below the 10-year Treasury yield’s 200-day moving average of 4.23%, a level that Ian Lyngen, head of U.S. rates strategy at BMO, indicated in a note Monday is “the first target in the event of a range-break.”
Bond yields and prices move in opposite directions.
Exchange-traded funds that track the U.S. bond market ended modestly lower, including the Vanguard Long-Term Treasury ETF VGLT and the Vanguard Total Bond Market ETF BND, according to FactSet data.
Optimism around more rate cuts this year under a Trump-appointed Fed chair has been an important theme for investors, with many anticipating looser monetary policy to support the U.S. economy, according to Andrew Slimmon, a senior portfolio manager for U.S. equities at Morgan Stanley Investment Management.
Slimmon said by phone that he sees the U.S. stock market’s rally as driven by fundamentals, not only last year but into 2026, which should be a healthy part of the continuing bull market — even if it appears to be in the late stages.