Wall Street Rises Amid Fed Political Tensions and Tech Earnings Optimism

U.S. stocks advanced on Tuesday, August 26, as investors digested President Donald Trump’s unprecedented move to remove Federal Reserve Governor Lisa Cook and awaited quarterly earnings from chip giant Nvidia.

At the close, the S&P 500 gained 0.41% to 6,465.94, the Nasdaq Composite added 0.44% to 21,544.27, and the Dow Jones Industrial Average climbed 135.60 points (or 0.30%) to finish at 45,418.07.

Bond Yields React as U.S. Dollar Weakens

The bond market saw mixed moves following Trump’s action. Long-term Treasury yields rose, while short-term yields slipped as traders priced in the possibility of near-term rate cuts but anticipated higher rates later if the Fed becomes more politically influenced and less focused on inflation.
Meanwhile, the ICE U.S. Dollar Index—tracking the greenback against six major currencies—edged down 0.2%.

Legal Battle Looms Over Fed Dismissal

Governor Lisa Cook plans to sue President Trump, according to her attorney. Abbe Lowell, her legal counsel, stated:

“The President lacks authority to remove a Federal Reserve Governor without legal cause. Attempting to do so based on a referral letter is neither factually nor legally justified.”

Under current law, a Fed governor can only be dismissed for “cause,” making Trump’s move highly controversial and raising concerns about the independence of the central bank.

The Fed now has six board members following Adriana Kugler’s resignation earlier this month. If Cook’s removal succeeds and Stephen Miran fills the vacant seat, Trump could hold a 4-3 majority on the board. Furthermore, if Chair Jerome Powell steps down after his term ends in May 2026, Trump would secure even greater influence.

Markets Focus on Fed Outlook and Nvidia Earnings

Investors remain hopeful for a rate cut in September 2025, following dovish signals from Powell during last week’s Jackson Hole symposium. Meanwhile, all eyes are on Nvidia’s quarterly results, scheduled for release on August 27, as they could significantly impact large-cap tech stocks.

Nvidia shares rose 1% on Tuesday, extending gains from the previous two sessions. Other mega-cap tech names, known as the “Magnificent Seven,” also rebounded after a recent five-day losing streak.

Trump Signals New Tariffs and Chip Export Restrictions

Adding to market uncertainty, Trump announced on August 25 plans for “significant” new tariffs and restrictions on chip exports to countries that fail to eliminate digital taxes. This stance could escalate trade tensions in the months ahead.