Fed probe sparks ‘Sell America’ market fears, rising Treasury yields.
The United States stock market experienced a day of significant volatility and uncertainty following reports that the Justice Department had subpoenaed the Federal Reserve, rekindling fears about the future independence of the central bank. The episode underscored a growing concern among investors regarding the administration’s willingness to exert pressure on the Fed, a key pillar of the U.S. economy. This situation, reminiscent of the “sell America” days of spring 2025, triggered a chain reaction across various financial markets, leading to declines in Treasury yields, a weakening dollar, and a surge in precious metals prices.
The Justice Department’s investigation, coupled with Chair Jerome Powell’s explicit characterization of the action as an “attack” on the Fed’s independence, immediately rattled global investors. The S&P 500 and Nasdaq indices opened slightly lower, reflecting the prevailing anxiety. The yield on U.S. government bonds dramatically increased, reaching levels not seen since September 2025, a clear signal of concern about the potential for a less independent Federal Reserve to struggle in managing inflation. Specifically, the yield on the 10-year Treasury rose above 4.2%, while the 30-year Treasury yield surpassed 4.8%. This surge in yields demonstrated a heightened risk aversion as investors reassessed the Fed’s credibility and its ability to maintain economic stability.
The dollar’s performance mirrored the turmoil in the bond markets. The ICE U.S. dollar index, a benchmark measure of the dollar’s value against a basket of currencies, fell by nearly 0.3%. This depreciation directly impacted U.S. companies that rely on international trade, making imports more expensive and reducing the competitiveness of American exports. The weakened dollar also fueled a rise in precious metals, particularly gold, as investors sought a safe haven asset amidst the heightened uncertainty. The price of gold rose by 2% and the price of silver increased by over 6.2%, highlighting the flight to safety inherent in periods of economic and political instability.
The market reaction was fueled by a series of unexpected policy announcements from the Trump administration, further compounding the anxieties. On Wednesday, President Trump abruptly announced plans to ban large institutional investors from purchasing single-family homes, a move that sent shares of real estate investment firms like Blackstone and Invitation Homes plummeting. This intervention, combined with a subsequent request for a massive increase in the U.S. annual defense budget, led to a dramatic reversal in the fortunes of the affected defense contractors. Similarly, a demand for $200 billion in mortgage bond buying triggered a sharp decline in mortgage rates, followed by an immediate rally in the shares of mortgage companies.
Adding to the complexity, President Trump issued a demand that credit card issuers cap interest rates at 10% for one year, a proposal that was swiftly rejected by the banking industry. This intervention caused significant declines in the stock prices of major credit card issuers like Capital One, American Express, and Citigroup. Furthermore, President Trump’s continued pressure on foreign companies, most notably his threat to retaliate against ExxonMobil for its assessment of Venezuela’s oil potential, added another layer of volatility to the markets. This episode underscored the administration’s willingness to disrupt established business practices and create uncertainty in global financial relationships. The overall situation underscored the fragility of investor confidence and the potential for rapid market shifts in the face of unpredictable policy interventions.
