Financial markets finished the week on a high note after Federal Reserve Chair Jerome Powell stood his ground against President Trump in a rare joint appearance by the two men Thursday.
The S&P 500 finished 0.4 percent up, and the Dow Jones Industrial Average finished up 208 points or 0.47 percent.
The tech-heavy Nasdaq Composite gained about a quarter of percent to close above 21,108.
Top gainers on the day included Comfort Systems USA, Bel Fuse, Deckers Outdoor Corp. and IES Holdings, according to Morningstar.
The bond market also cooled off Friday. The 10-year Treasury yield finished slightly down after trading higher during the day as did the 30-year.
The bond market has exhibited major stresses this year through Trump’s trade war. Outflows from long-dated U.S. public and private bond funds reached close to $11 billion in the second quarter, according to a June Financial Times analysis using EPFR data.
Friday’s gains followed a confrontation between Trump and Powell on Thursday in which Powell repelled an attack from Trump — this time not on social media but on television.
The exchange took place at a construction site where a Fed facility is undergoing renovations. The renovations have been criticized by administration officials for a cost overrun.
During the appearance, Trump told Powell that the overrun was higher than previously reported, which surprised Powell. Trump then produced a document in support of his claim, which Powell quickly scanned and then dismissed.
“You just added in a third building,” Powell responded.
“It’s a building that’s being built,” Trump rejoined.
“No,” Powell corrected the president. “It was built five years ago.”
“It’s part of the overall work,” Trump pressed.
But Powell pressed back: “It’s not new.”
Then the president moved on.
Powell’s quick analysis of the document and firmness in front of the cameras showed him withstanding presidential pressure, much as he’s done over interest rates.
The root of the disagreements between Powell and Trump is the Fed’s reluctance to resume interest rate cuts, which Trump has been calling for vociferously, even resorting to name calling.
He’s nicknamed Powell in various notes and social media posts as “Too Late” — a reference to the Fed’s rate hikes in response to the pandemic inflation, which Powell has acknowledged as being tardy.
The Fed is holding off on further cuts at the moment due to Trump’s tariffs, which have likely started to show up in prices. The consumer price index jumped to a 2.7-percent annual increase from 2.4 percent in May in line with expectations that businesses would pass along the import tax to consumers.
While a report emerged last week that Trump was moving to fire Powell, he said later that it would be “highly unlikely.”
Markets would react poorly to Powell’s firing, which would likely face legal hurdles and would hurt the traditional independence of the Fed, financial commentators have said.
Trump’s attacks and directives on interest rates are already undermining that independence, analysts say, even though they’re going unheeded.
“With repeated public criticisms of Powell by the White House, as well as explicit guidance from the President on interest rates, we are already moving along that spectrum,” Claudia Sahm, chief economist for New Century Advisors and a former Fed economist, wrote Thursday.
Markets also likely received some support from the announcement of additional trade deals this week, though details have not been released.
On Tuesday, Trump touted new agreements with Indonesia, the Philippines and Japan ahead of his Aug. 1 deadline for the resumption of novel “reciprocal” tariffs.
Specifics other than tariffs rates — 19 percent on Indonesia, 19 percent on the Philippines and 15 percent on Japan — are yet to be released, and it’s not clear to which goods and services those rates will apply.
Stocks surged earlier this year after contours of a deal with China were announced that left the effective tariff rate on the country around 50 percent.
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