U.S. Markets Slide as Trump Administration Escalates Pressure on Federal Reserve Independence

January 12, 2026 — Wall Street opened lower on Monday amid growing investor concerns over the independence of the Federal Reserve, following the revelation of a criminal investigation into Chair Jerome Powell. The development has triggered a flight to safe-haven assets, with gold surging to a new record high above $4,600 per ounce, while the dollar weakened and Treasury yields rose.

The Dow Jones Industrial Average fell around 0.8% in early trading, with the S&P 500 down approximately 0.3% and the Nasdaq Composite slipping 0.2% from recent record highs. Financial stocks, including major banks and credit card issuers, faced additional pressure after President Trump renewed calls for a temporary 10% cap on credit card interest rates, set to begin on January 20.

The turmoil stems from a Department of Justice announcement late last week that grand jury subpoenas have been issued to the Fed regarding Powell's congressional testimony last summer about cost overruns in a $2.5 billion headquarters renovation project. In a strongly worded video statement released Sunday evening, Powell described the probe as a "pretext" to intimidate the central bank into aligning monetary policy with White House preferences on interest rates.

"This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions—or whether instead monetary policy will be directed by political pressure or intimidation," Powell stated, vowing to maintain the Fed's independence.

Analysts warn that any perceived erosion of Fed autonomy could have lasting implications for U.S. financial credibility. Goldman Sachs and other institutions have highlighted reinforced concerns about potential political interference in rate decisions.

The market reaction reflects broader unease at the start of 2026. Investors appear to be adopting a "Sell America" stance in some cases, dumping U.S. assets in favor of traditional hedges like gold, which vaulted higher amid the uncertainty. The dollar index fell broadly, while longer-dated Treasury yields climbed as bond investors reassessed risks.

Elsewhere in the economy, recent data painted a mixed picture heading into the new year. The U.S. economy expanded at a robust 4.3% annualized rate in the third quarter of 2025, driven by strong consumer spending. However, the December jobs report showed sluggish growth with only 50,000 nonfarm payrolls added, though the unemployment rate eased slightly to 4.4%.

Inflation readings have been distorted by a prolonged government shutdown late last year, which disrupted data collection. The November CPI showed headline and core inflation at 2.7% and 2.6% year-over-year, respectively — softer than prior months but viewed cautiously due to methodological issues. Markets are now awaiting Tuesday's December CPI release, expected to show headline inflation holding around 2.7%, providing a clearer picture post-shutdown.

Despite the current volatility, some economists note underlying resilience, with fiscal stimulus potentially boosting activity in early 2026 after the recent government funding resolution.

As the week progresses, investors will closely monitor upcoming Fed speakers, retail sales data, and any further developments in the White House–Fed tensions — factors that could dictate the near-term direction for U.S. markets.