S&P 500, Nasdaq pause on fresh Fed pressure; banks hit by rate-cap proposal

By Medha Singh and Pranav Kashyap

(Reuters) – The S&P 500 paused near record highs on Monday as gains in artificial intelligence stocks and Walmart helped the index recover from an early slide driven by concerns over the Federal Reserve’s independence.

The three main indexes opened lower after the Trump administration threatened to indict Fed Chair Jerome Powell over his Congressional testimony on a renovation project.

Powell called the move a “pretext” to gain more influence over interest rates that President Donald Trump has pressed to cut sharply since taking office in January 2025.

“The market is used to a lot of back-and-forth in terms of suggested policy and suggested policy changes. We need see some type of action before the market will actually react to it in a meaningful way,” said Jordan Rizzuto, chief investment officer at GammaRoad Capital Partners.

Investors also turned cautious over stretched valuations ahead of the start of fourth‑quarter earnings season this week, starting with JPMorgan Chase on Tuesday. The S&P 500 and the Dow closed at record highs on Friday.

At 11:33 a.m. ET, the Dow Jones Industrial Average fell 80.61 points, or 0.17%, to 49,421.82, the S&P 500 gained 0.97 points, or 0.01%, to 6,966.99 and the Nasdaq Composite gained 48.32 points, or 0.20%, to 23,719.66.

Walmart gave the biggest boost to both the S&P 500 and the Nasdaq with a 3.5% gain. The retail giant, which moved its listing to the Nasdaq from the NYSE last month, is set to join the Nasdaq-100 index on January 20, a shift that could draw in billions of dollars from passive index funds.

Among AI stocks, Alphabet scaled $4 trillion market valuation for the first time, while Broadcom climbed 1.4%.

CREDIT-CARD RATE CAP

Shares of lenders and credit card firms came under pressure after U.S. President Donald Trump called for a one-year cap on credit card interest rates at 10% starting on January 20.

Citigroup tumbled 3.5%, while credit-card firm American Express shed 4.4%. Consumer finance firms such as Synchrony Financial slumped 8.4% and Capital One fell 6.8%.

Buy-now, pay later firms Klarna and Affirm fell 2.8% and 6%.

The broader financial sector fell 1%.

Friday’s data suggesting the labor market is not deteriorating as quickly as feared prompted J.P. Morgan, Barclays and Goldman Sachs to join Morgan Stanley in pushing back their calls for U.S. rate cuts.

Markets are still betting on at least two more quarter-point cuts before year-end, according to LSEG data. The focus now shifts to Tuesday’s U.S. CPI report.

Wall Street’s fear gauge, the CBOE Volatility index, touched its highest since December 18, while safe-haven gold hit a record high for the first time this year, lifting miners such as Newmont Corp by 3.8%.

In other corporate news, Trump said he might block Exxon Mobil from investing in Venezuela following CEO Darren Woods’ comments that the South American country is “uninvestable.” The U.S. energy major’s shares dropped 0.7%.

Advancing issues outnumbered decliners by a 1.28-to-1 ratio on the NYSE and declining issues matched advancers on the Nasdaq.

The S&P 500 posted 29 new 52-week highs and two new lows, while the Nasdaq Composite recorded 97 new highs and 58 new lows.

(Reporting by Medha Singh and Pranav Kashyap in Bengaluru; Editing by Maju Samuel)