US stocks staged a late recovery on Monday, with the S&P 500 edging into positive territory as investors looked past fresh political and regulatory concerns. The rebound came despite news that federal prosecutors have opened a criminal investigation into Federal Reserve Chair Jerome Powell. Traders also weighed renewed debate over proposals to cap credit card interest rates, which weighed heavily on bank shares.
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By early afternoon, the S&P 500 was up 0.1 percent after slipping as much as 0.5 percent earlier in the session. The Nasdaq Composite gained 0.4 percent, supported by technology stocks, while the Dow Jones Industrial Average hovered near the flatline. At session lows, the Dow had been down nearly 500 points, highlighting the volatility that marked the start of the week.
S&P 500 rebounds after early market selloff
The S&P 500 clawed back losses as investors reassessed the broader economic picture. Early selling followed confirmation from Powell that the Department of Justice had opened a criminal investigation tied to his testimony before the Senate Banking Committee. The probe relates to statements about the renovation of Federal Reserve office buildings.
Powell described the investigation as another attempt by former President Donald Trump to influence monetary policy. He said he would not bow to political pressure. His current term as Fed chair is set to expire in May. Despite the headline risk, traders appeared unwilling to make aggressive moves based on political uncertainty alone.
Market participants instead focused on resilient corporate earnings expectations and upcoming economic data. Many saw Monday’s dip as an opportunity to buy selectively, which helped lift the S&P 500 back into the green.
Bank stocks slide on rate cap concerns
While the broader market stabilized, bank stocks struggled. Trump’s renewed call to cap credit card interest rates at 10 percent for one year added to investor unease. Critics argue such a move, while aimed at easing consumer costs, could restrict lending and pressure bank profitability.
Citigroup shares fell about 3 percent. JPMorgan Chase and Bank of America declined roughly 2 percent each. Capital One dropped as much as 6 percent, making it one of the worst performers in the financial sector. The weakness in banks weighed on the Dow and limited gains in the S&P 500.
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Analysts noted that uncertainty over regulation often hits financial stocks first. However, they also pointed out that any policy changes would likely face legal and practical hurdles, reducing the likelihood of immediate impact.
Investors downplay risks to Fed independence
Despite sharp headlines, many strategists described the investigation into Powell as near-term noise. Rob Williams, chief investment strategist at Sage, said markets were more focused on economic data than political drama. He noted that bond yields showed little reaction, suggesting limited concern about immediate policy disruption.
Williams pointed to the upcoming release of the December consumer price index as the next key catalyst. Inflation data remains central to expectations for future interest rate decisions. For now, traders appear comfortable assuming the Federal Reserve will maintain its current stance.
Jim Lebenthal, chief markets strategist at Cerity Partners, echoed that view. He said the investigation could have long-term implications but is unlikely to affect inflation or interest rates in the near term. That outlook helped steady the S&P 500 as the session progressed.
Earnings and growth support the S&P 500
Optimism around corporate earnings also underpinned the market. Several investors expect results this week to be solid, reflecting an economy that continues to grow at a healthy pace. Lebenthal said there are “too many good things” in the short term for markets to ignore, even if political risks linger.
In 2025, markets largely shrugged off repeated efforts by Trump to pressure the Federal Reserve. During that period, the central bank cut rates three times as inflation stabilized. Although Trump has continued to push for lower rates, the Fed is widely expected to pause when it meets later this month.
That expectation has helped anchor sentiment. Traders believe the Fed will wait for clearer signals on inflation and growth before making further moves. This outlook has reduced volatility and supported the S&P 500 despite ongoing political tension.
Gold jumps as hedge against uncertainty
Gold futures jumped about 2 percent during the session. The rally reflected investor demand for hedges against potential erosion of Federal Reserve independence. Some fear that increased political pressure on the central bank could make it harder to contain future inflation.
Historically, gold tends to benefit when confidence in monetary policy weakens. Monday’s move suggested that while equity investors remained calm, some portfolio managers were quietly adjusting risk exposure.
Walmart and tech stocks lift markets
Gains in select large-cap stocks helped offset weakness in financials. Walmart shares rose about 2 percent ahead of its upcoming inclusion in the Nasdaq-100 index. The retailer’s strength supported the consumer sector and contributed to the S&P 500 rebound.
Technology stocks also provided a lift. Palantir gained 1 percent after receiving an upgrade from Citi. Advanced Micro Devices and Oracle traded higher as investors rotated into growth names following the early selloff.
These moves highlighted a familiar pattern in recent months. When uncertainty rises, investors often gravitate toward large, liquid stocks with strong earnings visibility. That dynamic helped stabilize the S&P 500 during the afternoon.
Market outlook remains data driven
Looking ahead, traders say economic data will remain the dominant driver of market direction. Inflation figures, earnings reports, and guidance from policymakers are likely to outweigh political headlines in the short term.
While concerns about Federal Reserve independence and regulatory risk have not disappeared, Monday’s trading showed that investors remain focused on fundamentals. As long as growth holds up and inflation continues to ease, many believe the S&P 500 can maintain its upward momentum.
US stocks recovered from early losses as investors shrugged off Fed pressure, bank stock weakness, and rate cap fears lifting the S&P 500 S&P 500
