NEW YORK (AP) — Wall Street hit more records Monday after recovering from losses suffered on concerns about the worsening dispute between the White House and the Federal Reserve, a dispute that experts warn could lead to higher inflation in the future.
The S&P 500 rose 0.2% to its previous all-time high set on Friday. The Dow Jones Industrial Average recovered from an early loss of nearly 500 points and added 86 points, or 0.2%, to its own record, while the Nasdaq composite gained 0.3%.
However, some nervousness was still evident in the market, amid concerns that the Federal Reserve could be on a path toward less independence in setting interest rates to keep inflation under control. Prices of gold and other investments that tend to do well when investors are nervous rose, while the value of the U.S. dollar fell against other currencies.
Walmart helped boost the US stock market despite concerns. It rose 3% after learning its stock will join the widely followed Nasdaq 100 index. Google also said Sunday that it is expanding shopping features in its AI chatbot by partnering with Walmart and several other big retailers.
Google parent Alphabet rose 1% to lift its total market value above $4 trillion after a torrid run helped by its artificial intelligence offerings.
They helped offset losses for a slight majority of stocks within the S&P 500. Leading the way were credit card companies after President Donald Trump threatened measures that could hit their profits.
Synchrony Financial fell 8.4%, Capital One Financial sank 6.4% and American Express fell 4.3%. They weakened after Trump said he wanted to cap credit card interest rates at 10% for a year.
But it was a separate measure involving Washington that attracted the most attention in financial markets. Over the weekend, the Federal Reserve chairman said the U.S. Justice Department subpoenaed the Fed and threatened criminal charges over his testimony about renovations at its headquarters.
Through a rare video statement released Sunday, Federal Reserve Chairman Jerome Powell said his testimony and the renewals are “pretexts” for the threat of criminal charges, which he said is actually “a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the President’s preferences.”
The Federal Reserve has been embroiled in a dispute with Trump, who has loudly called for lower interest rates to make borrowing cheaper for American households and businesses and give the economy a boost. The Federal Reserve lowered its key interest rate three times last year and indicated more cuts could come this year, but it did so so deliberately that Trump dubbed Powell “Too Late.”
White House press secretary Karoline Leavitt told reporters on Monday that Trump did not direct his Justice Department to investigate Powell.
The Federal Reserve has traditionally operated separately from the rest of Washington, making its decisions without having to bow to political whims. That independence is thought to give it the freedom to keep interest rates high when necessary to reduce high inflation, even if it slows the economy and frustrates politicians seeking to please voters.
In the bond market, the 10-year Treasury yield briefly rose to 4.21%, up from 4.18% on Friday, amid concerns that a less independent Federal Reserve could lead to higher inflation in the long term. But then it dropped again to 4.18%.
The concerns also affected the value of the US dollar, which fell 0.4% against the euro and 0.6% against the Swiss franc.
Analysts said financial markets were spared from concerns about the Federal Reserve’s independence for several potential reasons. Traders could see “a limitation on the White House’s success in getting its way,” according to Thierry Wizman, a strategist at Macquarie Group, because Congress could deny confirmation of any White House nominee to the Federal Reserve.
“What is in question now is the independence and credibility of the Department of Justice,” Sen. Thom Tillis, R-North Carolina, said on social media. “I will oppose the confirmation of any nominee to the Federal Reserve, including the upcoming vacant Federal Reserve Chairman, until this legal matter is fully resolved.”
Trump has already harshly criticized the Federal Reserve and is currently trying to fire Fed Governor Lisa Cook, but the Fed’s rate-setting committee still appears to be acting independently.
Additionally, this latest move could encourage Powell to remain on the Federal Reserve as governor until his term expires in 2028, even though his term as chairman will end in May, said Brian Jacobsen, chief economist at Annex Wealth Management.
“With political pressure on the Federal Reserve, he may choose to remain governor out of spite,” he said. “It would deprive President Trump of the ability to add another appointee to the board.”
On Wall Street, Abercrombie & Fitch fell 17.7% after the retailer gave a forecast range of earnings for the final quarter of 2025 whose midpoint missed analyst expectations. Its revenue growth forecast also lagged Wall Street’s.
Other retailers that sell clothing in malls also struggled, including drops of 12.3% for Urban Outfitters and 3.5% for American Eagle Outfitters.
In total, the S&P 500 rose 10.99 points to 6,977.27. The Dow Jones Industrial Average added 86.13 to 49,590.20 and the Nasdaq composite gained 62.56 to 23,733.90.
The price of gold rose 2.5% to a record close of $4,614.70 an ounce
In foreign stock markets, indices were mixed across Europe following stronger performance in Asia. Shares rose 1.4% in Hong Kong and 1.1% in Shanghai, two of the world’s biggest gains following reports that Chinese leaders were preparing more aid for the economy.
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AP Business writers Matt Ott and Elaine Kurtenbach contributed.
