Wall Street recovers as Trump dismisses immediate Powell firing plans

US stocks rebound from midday volatility

Wall Street demonstrated its resilience yesterday, recovering from a sharp midday selloff triggered by speculation that President Trump might dismiss Federal Reserve (Fed) Chair Jerome Powell. The initial reports sent shockwaves through trading floors, but markets quickly stabilised once Trump clarified his position.

The president denied any immediate plans to remove Powell, though he characteristically kept his options open for the future. This measured response helped calm investor nerves, allowing the major indices to claw back their losses and finish in positive territory.

The recovery highlighted the market's underlying strength, with buyers quickly stepping in during the dip. This pattern of resilience has become a hallmark of the current bull market, where any weakness is met with renewed buying interest.

The episode serves as a reminder of how sensitive markets remain to political developments, particularly those involving central bank independence. Traders will be watching closely for any further commentary from the administration on Fed policy.

Nasdaq extends record-breaking streak

The Nasdaq Composite continued its impressive run, gaining 0.26% to notch its fifth record close in six trading sessions. This remarkable streak underscores the technology sector's continued appeal among investors seeking growth opportunities.

The index's outperformance reflects ongoing optimism about artificial intelligence (AI), cloud computing, and other technological innovations. Major tech names have been driving much of the gains, with investors betting on continued earnings growth in the sector.

Despite occasional volatility, the Nasdaq has shown remarkable consistency in reaching new highs. This trend suggests that institutional investors remain committed to technology stocks as a long-term growth play.

The broader US&P 500 also recovered well, adding 0.32%, while the Dow Jones posted the strongest performance with a 0.53% gain. This breadth of gains across different indices indicates healthy market participation.

Banking sector delivers mixed earnings results

The financial sector provided a mixed bag of results, with Goldman Sachs leading the charge higher on the back of strong second-quarter (Q2) earnings. The investment bank's performance exceeded expectations, boosting confidence in the sector's outlook.

However, Bank of America and Morgan Stanley both declined despite reporting profit increases.

The banking sector's performance often serves as a barometer for the broader economy, making these results particularly noteworthy. Strong earnings from major banks typically indicate healthy lending conditions and economic activity.

Global markets remain cautious amid dollar weakness

Asian markets displayed a cautious tone overnight, with most indices trading in narrow ranges as investors digested the United States (US) developments. European futures pointed to a modestly positive open, suggesting some optimism carries over into today's trading.

The US dollar continued to show weakness across major currency pairs, reflecting ongoing concerns about Fed independence. This US dollar softness has provided support for commodities and emerging market currencies.

UK unemployment rises unexpectedly to 4.7%

Closer to home, the United Kingdom (UK) labour market showed signs of softening as the unemployment rate unexpectedly rose to 4.7% in the three months to May. This increase surprised economists who had forecast a stable reading.

Pay growth also showed signs of deceleration, reinforcing the Bank of England's (BoE) cautious stance on further interest rate cuts. The central bank will likely view these developments as supporting their gradual approach to monetary policy.

The jobs data comes at a crucial time for UK policymakers, who are balancing concerns about inflation with signs of economic softening. This delicate balance will influence the BoE's decision-making in the coming months.

UK traders should monitor how these employment trends develop, as they could significantly impact the British pound's performance and domestic equity markets. The data reinforces the importance of watching economic indicators closely.

Netflix earnings highlight today's focus

Today's trading session will centre around Netflix's earnings announcement, with the streaming giant under pressure to justify its recent outperformance. The company's results could provide insights into consumer spending on entertainment services.

Netflix has been one of the standout performers in recent months, but this success has raised expectations significantly. Any disappointment in subscriber numbers or forward guidance could trigger profit-taking.

Key US economic data today includes jobless claims and housing starts, both of which will provide further insights into the economy's health. These indicators remain crucial for understanding the Fed's policy trajectory.