Market Rebounds as Trump Reaffirms Support for Fed Chair Powell Amid Economic Concerns

President Donald Trump’s recent decision to back away from threats to remove Federal Reserve Chair Jerome Powell has helped calm volatile financial markets, following a week marked by investor unease and White House tension.

According to sources familiar with internal discussions, several of Trump’s top economic advisers had warned him that any move to oust Powell could trigger significant financial turmoil—comparable to the effects of the ongoing trade war with China. These cautions appeared to resonate as the president publicly stated on Tuesday during a meeting with reporters in the Oval Office:

“I have no intention to fire him.”

Markets responded swiftly and positively to the announcement. Stock futures surged, with the Dow Jones Industrial Average up by over 750 points (1.9%), the S&P 500 rising 2.6%, and the Nasdaq increasing by 3%. In the bond market, US Treasury yields fell as investors moved into safer assets, pushing the 10-year yield down to 4.3%.

The market rally also followed comments from Treasury Secretary Scott Bessent suggesting that the administration was pursuing a path toward easing trade tensions with China. These combined reassurances lifted investor sentiment across the globe, with gains reported in Asian and European markets.

Top administration officials, who had grown increasingly uncomfortable with Trump’s intensifying criticism of Powell, expressed relief at the president’s reversal. Despite weeks of sharp rhetoric—including calling Powell a “major loser” and tweeting that his “termination cannot come fast enough”—Trump’s acknowledgment of Powell’s continued role as Fed chair appears to have stabilized immediate fears.

The Federal Reserve, led by Powell, has consistently emphasized its independence and commitment to data-driven policy. The central bank has resisted political pressure to adjust interest rates outside its scheduled reviews. This stance has drawn criticism from Trump, who argues that rate cuts are necessary to counteract the economic effects of his tariff policies.

Some within the administration, including economic adviser Kevin Hassett, had even suggested exploring legal avenues to remove Powell. However, concerns over potential market backlash and protracted legal disputes led most advisers to caution against such a move.

Trump’s softened tone came after a particularly turbulent Monday, when CEOs from major retailers such as Walmart, Target, and Home Depot privately warned the president that continued trade disruptions could severely impact supply chains and lead to higher consumer prices and empty shelves. According to administration sources, this meeting, combined with market slumps, contributed to the shift in strategy.

In a coordinated communication effort, Treasury Secretary Bessent and Press Secretary Karoline Leavitt emphasized that trade negotiations were advancing and downplayed the notion that the Federal Reserve was acting for political reasons. While Trump has maintained his right to criticize the Fed, he ultimately stepped back from direct threats to its leadership.

Still, economic headwinds persist. Inflation remains elevated, growth has shown signs of slowing, and investor confidence has been shaken. Though the recent rebound offers some relief, analysts caution that market volatility is likely to continue as long as uncertainty surrounds both domestic policy and international trade relations.

As Paul Donovan, chief economist at UBS Global Wealth Management, noted in a client report:

“The erratic threaten-retreat cycle has economic consequences. The uncertainty this causes may impact consumer and business decision-making.”

With input from CNN, Axios, and the New York Times.