The major U.S. equity indexes were modestly higher Tuesday despite another attempt by President Donald Trump to impose his will on the Federal Reserve and perhaps in part because his administration plans to buy more stocks.
Shortly after 8 p.m. Eastern Standard Time on Monday, President Trump posted on his Truth Social platform a letter to Fed Governor Lisa Cook informing her of her removal from the Federal Reserve Board "for cause."
The president cited allegations of mortgage fraud raised by Federal Housing Finance Administration Director Bill Pulte.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
And, following the federal government's recent conversion of approximately $9 billion in grants to Intel (INTC, -0.8% ) included in the CHIPS Act of 2022 into a 10% equity stake, National Economic Council Director Kevin Hassett and Commerce Secretary Howard Lutnick confirmed the White House will explore purchases in other sectors.
Pentagon officials are "thinking about" buying defense stocks such as Lockheed Martin (LMT, +1.8%), Lutnick said on CNBC. "Oh, there's a monstrous discussion about defense," Lutnick responded when asked whether the White House would make similar deals with different government contractors.
"I'm not sure which is more unsettling," observes Harris Financial Group Managing Partner Jamie Cox, "the government upending Federal Reserve independence or taking large stakes in private businesses."
Boeing (BA, +3.5%) – whose Defense, Space & Security unit has big contracts with the Defense Department as well as foreign military customers – was No. 1 among the 30 Dow Jones stocks Tuesday.
BDS revenue grew by 10% during the second quarter to $6.6 billion, making it Boeing's second-biggest operating unit at 29% of total revenue. BA stock is going to be a big holding in just about any of the best aerospace and defense ETFs.
"The U.S. took stakes in large banks during the Global Financial Crisis and the stocks were dead for 10 years," Cox notes, "so caution is warranted for any company who cedes a stake to the government right now."
By the closing bell, the blue-chip Dow Jones Industrial Average had risen 0.3% to 45,418, the broad-based S&P 500 was up 0.4% to 6,465, and the tech-heavy Nasdaq Composite had added 0.4% at 21,544.
Can President Trump fire Fed Governor Cook?
Can President Trump fire Fed Governor Cook? raises one of those truisms you get used to when you hang around long enough.
Markets hate uncertainty – even more when it comes to monetary policy and interest rates. But, with questions about the most important central bank in the world seemingly compounding by the day, markets remain relatively calm.
"The President is going to remake the Board of Governors of the Federal Reserve over the next year," Cox says, "and he's doing so in very unconventional ways." According to Cox, Fed Governor Adriana Kugler's recent resignation and Cook's removal, if successful, would "open the door to accelerate this change."
In the process, Cox notes, "Trump has essentially usurped the Fed's forward guidance function for the time being." Investors, traders and speculators are reacting to Trump basically telling them lower interest rates are on the way, with short-term Treasuries "dropping like a rock" and a steepening yield curve.
The yield on the 2-year Treasury note fell to 3.685% vs 3.730% as of Monday's closing bell, and the yield on the 10-year U.S. Treasury note was down to 4.261% vs 4.275% Monday. But the 30-year yield rose to 4.911% from 4.889%.
Shorter-dated Treasuries are more sensitive to Fed interest rate policy. Longer-dated Treasuries say more about the macro picture.
The U.S. Dollar Index (DXY) – a measure of the currency's value relative to a basket of foreign currencies including the euro, the Japanese yen, the British pound, the Canadian dollar, the Swedish krona and the Swiss franc – was down modestly from 98.43 to 98.24.
The employment market hardens
Meanwhile, incoming data so crucial to the next Fed meeting continues to underscore what the July jobs report showed: The employment market is hardening.
The Conference Board's Consumer Confidence Index dipped to 97.4 in August from 98.7 in July, as consumers' feelings about both current and future business, labor and income conditions worsened.
Indeed, the Expectations Index declined by 1.2 points to 74.8, below the threshold of 80 that typically signals a recession ahead. "Notably," according to The Conference Board Senior Economist Stephanie Guichard, "consumers' appraisal of current job availability declined for the eighth consecutive month."
As LPL Chief Economist Jeffrey Roach notes, it's the worst employment outlook in more than four years. "Consumer confidence in August dipped ever so slightly as more consumers expect annual inflation to rebound. But the biggest news is the number of consumers saying jobs are hard to get."
That number is the highest it's been since March 2021. And those feelings about the present and the future "will likely translate into lower consumer spending."
Everybody wants to see Nvidia's earnings
We'll know after Wednesday's closing bell whether a fiscal 2026 second-quarter earnings report from Nvidia (NVDA, +1.1%) is a bigger market-moving story than Trump and the Fed.
And we'll be following all the action, including CEO Jensen Huang's always fascinating conference call commentary, on our live Nvidia earnings blog.
Wall Street expects Nvidia to report earnings of $1.01 per share, up from 68 cents a year ago, on revenue growth of 53% to $46 billion.
"The market is waiting for the Nvidia numbers," writes Louis Navellier of Navellier & Associates, "where the downside of any disappointments is probably greater than the upside of an even stronger outlook that is already priced into the world's most valuable stock."
Related content
- How to Invest for a Fall Interest Rate Cut by the Fed
- How to Invest in Stocks as a Beginner: A Guide for 2025
- Bonds Pay in Good and Bad Times
-
Try This One-Minute Test to Uncover Hidden Health RisksFinding out this little-known fact about your body could reveal your risk of heart disease and more. It's a simple, free check for healthy aging.
-
Child-Free Cruises Perfect For Your Retirement CelebrationHow to find a bespoke ocean or river vacation for adults. Many of these options are smaller, charming river cruises, expeditions, or niche experiences.
-
Social Security Wisdom From a Financial Adviser Receiving Benefits HimselfYou don't know what you don't know, and with Social Security, that can be a costly problem for retirees — one that can last a lifetime.
-
Take It From a Tax Expert: The True Measure of Your Retirement Readiness Isn't the Size of Your Nest EggA sizable nest egg is a good start, but your plan should include two to five years of basic expenses in conservative, liquid accounts as a buffer against market volatility, inflation and taxes.
-
Dow Adds 472 Points After September CPI: Stock Market TodayIBM and Advanced Micro Devices created tailwinds for the main indexes after scoring a major quantum-computing win.
-
October Fed Meeting: Live Updates and CommentaryThe October Fed meeting is a key economic event, with Wall Street waiting to see what Fed Chair Powell & Co. will do about interest rates.
-
The Delayed September CPI Report is Out. Here's What it Signals for the Fed.The September CPI report showed that inflation remains tame – and all but confirms another rate cut from the Fed.
-
New Opportunity Zone Rules Triple Tax Benefits for Rural Investments: Here's Your 2027 StrategyNew IRS guidance just reshaped the opportunity zone landscape for 2027. Here's what high-net-worth investors need to know about the enhanced rural benefits.
-
Honeywell Leads Dow Higher: Stock Market TodayOil prices got a lift after the Treasury Department announced new sanctions on Russia's two largest oil companies.
-
The OBBB Ushers in a New Era of Energy Investing: What You Need to Know About Tax Breaks and MoreThe new tax law has changed the energy investing landscape with expanded incentives and permanent tax benefits for oil and gas production.
