US stock futures down on Fed investigation

Dow Jones Industrial Average futures dropped 0.5%, futures on the S&P 500 slid 0.6%, while Contracts tied to the Nasdaq 100 plunged 0.9%

US stock futures dropped Sunday night as the stock market reacted to the Trump administration opening a criminal investigation into central bank Chair Jerome Powell.

Dow Jones Industrial Average futures dropped 0.5% while futures on the S&P 500 slid 0.6%. Contracts tied to the Nasdaq 100 plunged 0.9%.

Investors were rattled late Sunday evening after central bank chair Jerome Powell released a statement revealing that the Department of Justice had subpoenaed the bank.

In an uncharacteristic video address, Powell stated that the Department of Justice served the bank with grand jury subpoenas, threatening a criminal indictment related to my testimony before the Senate Banking Committee last June.

Powell claimed that the move was a direct attack for the setting of interest rates that “serve the public” rather than “following the preferences of the President.”

The tumultuous start follows a strong finish to last week, when stocks jumped to new record highs. Both the S&P 500 and the Dow closed Friday at new highs, extending a rally that pushed the S&P 500 up more than 1% for the week. The Dow and Nasdaq Composite posted even stronger gains, rising 2.3% and 1.9%, respectively.

The significant escalation in Trump’s feud with the bank chair comes as markets are bracing for the latest consumer inflation report, due Tuesday. The release comes on the heels of Friday’s December jobs report, which showed continued cooling in the labour market without signalling a sharp economic slowdown.

Taken together, the data has reinforced expectations that the bank will remain on hold for now, with CME FedWatch offering a 95% probability of rates staying the same.