Markets Drop and Dollar Sinks to 3-Year Low After Trump Renews Attacks on Powell

Market Meltdown: Stocks Tumble as Trump Targets Fed Chair

US stocks took a big hit on Monday, April 21, 2025, as President Donald Trump continued his attacks on Federal Reserve Chair Jerome Powell. The Dow Jones Industrial Average fell a whopping 972 points (2.48%), while the S&P 500 dropped 2.36% and the tech-heavy Nasdaq slid 2.55%.

Almost every company in the Dow and S&P 500 closed lower, showing how wide the sell-off was. All three major indexes were already down last week and are now on track for their worst month since 2022. This ain't just a small dip - it's turning into a serious market correction.

Investors are clearly worried about Trump's ongoing efforts to push out Powell and the uncertain future of US trade policy. The market reaction shows growing concern that political interference with the Fed could damage the US economy and investor confidence.

Trump's Escalating War Against the Fed Chair

Trump ratcheted up his attacks on Powell on Monday, calling him a "major loser" in a social media post while demanding lower interest rates. This comment followed his Thursday statement that Powell's "termination cannot come fast enough!" and his declaration to reporters: "If I want him out, he'll be out of there real fast, believe me."

The president, who actually appointed Powell during his first term, has been feuding with the Fed chair over interest rates for years. But the warnings of economic fallout from these attacks seem more serious now.

Trump's attacks intensified after the European Central Bank cut its benchmark interest rate and after Powell spoke last week about the potential economic consequences of Trump's tariff agenda. Powell warned on Wednesday at an event in Chicago that Trump's tariffs were unlike anything in modern history, with the potential to stoke inflation and drag on economic growth.

Fed Chair Powell issued his strongest comments yet defending the central bank's independence, a core principle of modern monetary policy that appears under threat.

Kevin Hassett, Director of the National Economic Council, told reporters on Friday that the Trump administration "will continue to study" the possibility of removing Powell. Hassett said he wants to look into "new legal analysis" before determining whether Trump can or should terminate Powell - a break from his previous comments supporting Fed independence.

Dollar Takes a Dive as Confidence Wavers

The US dollar index, which measures the dollar's strength against six foreign currencies, slumped more than 1% to reach its lowest level in more than three years. This is really unusual because when stocks fall, investors usually seek safe havens like US government bonds and the dollar.

But now, investors are selling dollars while other safe havens like gold are soaring. This sugests people are losing faith in the stability of US markets and policy.

"President Trump's renewed criticism of Fed Chair Powell this week is a reminder that trade policy is not the only channel through which the administration's unconventional approach could undermine the dollar and US asset markets," said Jonas Goltermann, senior markets economist at Capital Economics, in a Thursday note.

Krishna Guha, vice chairman at Evercore ISI, said in a Friday note that "recent market action shows a loss of confidence in Trump economic policy," pointing to higher Treasury yields and a weaker dollar as evidence.

Analysts at Macquarie said in a Monday note that "flight from the USD" stems from "concerns over the Fed's independence" and a lack of trade deal announcements, which suggests that negotiations over tariffs might last many months.

Can Trump Actually Fire Powell? Legal Questions Loom

Many financial and legal experts doubt that Trump has the legal authority to fire Powell over policy disagreements. The Federal Reserve Act allows governors to be removed only "for cause," which courts have interpreted as meaning serious misconduct, not policy differences.

While Trump has made clear he's willing to break with norms and precedent, an attempt to fire Powell would likely face immediate legal challenges and could trigger even more severe market reactions than we've already seen.

"I don't think Wall Street likes the fact that the president is trying to control monetary policy, which would certainly not be a good thing over the [long term]," said Sam Stovall, chief investment strategist at CFRA Research.

The Fed's independence from political pressure is considered essential to its credibility and effectiveness. Markets expect the Federal Reserve to make decisions based on economic data rather than political pressure, and any threat to that independence raises serious concerns among investors.

Stock market reactions to tariffs have already been negative, but an actual attempt to remove Powell could potentially trigger a much more severe market correction.

Gold Soars as Investors Seek Safe Haven

As stocks tumbled and the dollar weakened, gold prices surged more than 3% on Monday to hit a fresh record high above $3,400 per troy ounce. The precious metal has been on a tear this year as investors seek safe havens amid economic uncertainty.

Gold is now up about 30% this year, outpacing its impressive gain of 27% across all of 2024. This remarkable performance demonstrates the level of anxiety in financial markets as investors rush to assets perceived as stable during times of turmoil.

Unlike the dollar, which is directly tied to US monetary policy and potentially vulnerable to political interference, gold has maintained its historical role as a store of value during uncertain times. The record prices show that investors are significantly concerned about current market conditions and US policy direction.

The surge in gold prices alongside the drop in the dollar is a particularly troubling signal because it suggests investors are specifically losing confidence in US assets rather than seeking safety in cash during a general market downturn.

Trade Uncertainty Compounds Market Fears

The market on Monday was reacting negatively not only to Trump's pressure on Fed Chair Powell but also to the lack of a trade deal announcement after the Trump administration met with officials from Japan last week, according to Stovall.

"The 'test case' of US-Japan negotiations failed to reach a deal on trade and tariffs late last week," said Thierry Wizman, global FX and rates strategist at Macquarie. "That suggests a period of bilateral negotiations that last into July, and casts doubt about the willingness of the US and its allies to make bilateral concessions easily."

Trump's tariffs and their impact on low-cost tech have been particularly concerning for many technology companies. Nvidia took a $55 billion hit from US trade tensions, showing how vulnerable tech stocks are to trade policy uncertainty.

The yield on the 10-year Treasury rose above 4.4% on Monday, up from Thursday. (US trading was closed Friday in observance of Good Friday.) Higher bond yields typically reflect expectations of higher inflation or economic instability, adding another worrying signal to the mix.

Earnings Season: Corporate America Faces the Music

Wall Street this week will also digest a slate of first-quarter earnings results. Investors will likely be paying close attention to chief executives' guidance and forecasts for the year amid heightened tariff uncertainty.

Tesla, which slumped 5.75% on Monday, is scheduled to report earnings after the bell on Tuesday. Alphabet, which fell 2.31% on Monday, is expected to report earnings on Thursday.

"Tariffs will remain top of mind over the coming few months, yet investors are likely to refocus their short-term attention on the Q1 2025 earnings reporting period," said CFRA Research's Stovall in a Monday note.

The earnings reports will provide important insights into how major corporations are planning to handle the uncertain trade environment and potential Fed policy changes. Many analysts expect companies to offer cautious guidance given the political and economic uncertainties.

Corporate executives might also comment directly on how tariffs and monetary policy uncertainty are affecting their businesses, providing valuable information for investors trying to assess the real economic impact of current policies.

Markets Await Federal Reserve's May Meeting

The Fed's board of governors is scheduled to meet the first week of May to determine its next decision on its benchmark interest rate. About 88% of traders expect the Fed to hold rates steady, according to the CME FedWatch tool.

"Powell reiterated that the Fed is likely to remain in wait-and-see mode as it assesses the effect of tariffs on the economy," analysts at Morgan Stanley said in a Monday note.

Despite Trump's demands for rate cuts, the Fed appears committed to making decisions based on economic data rather than political pressure. If inflation rises due to tariffs, as Powell has suggested it might, the Fed could actually delay rate cuts further, contrary to Trump's wishes.

The upcoming Fed meeting will be closely watched not just for the policy decision itself but also for any signs of changing dynamics between the central bank and the White House. Powell's press conference will be scrutinized for hints about how the Fed plans to maintain its independence amid political pressure.

The Fed's decision and communication will have major implications for both the stock market and the dollar, potentially either calming market fears or exacerbating them depending on how investors interpret the central bank's stance.

Frequently Asked Questions

How much did the stock market fall on April 21, 2025?

The Dow Jones Industrial Average fell 972 points (2.48%), the S&P 500 dropped 2.36%, and the Nasdaq Composite declined 2.55%.

Why did the US dollar fall to a three-year low?

The dollar fell due to waning investor confidence stemming from concerns about the Federal Reserve's independence and uncertainty surrounding US trade policies. Analysts described it as a "flight from the USD."

What did Trump say about Federal Reserve Chair Jerome Powell?

Trump called Powell a "major loser" on social media and previously stated that Powell's "termination cannot come fast enough!" He told reporters, "If I want him out, he'll be out of there real fast, believe me."

Can President Trump legally fire Jerome Powell?

Many experts believe he cannot fire Powell over policy disagreements. The Federal Reserve Act allows governors to be removed only "for cause," which courts have interpreted as meaning serious misconduct, not policy differences.

How did gold prices react to the market turmoil?

Gold surged more than 3% to a record high above $3,400 per troy ounce. Gold is up about 30% in 2025, outpacing its 27% gain across all of 2024.

What is the Federal Reserve expected to do at its May meeting?

About 88% of traders expect the Fed to hold interest rates steady at its May meeting as it assesses the economic effects of tariffs and other factors.

How are tariff uncertainties affecting businesses?

Tariff uncertainties are causing businesses to be cautious about future plans. Failed US-Japan trade negotiations suggest a prolonged period of bilateral negotiations that could last months, creating planning challenges for businesses with international supply chains.

What other factors are contributing to market volatility?

Besides Trump's attacks on Powell and trade uncertainties, investors are closely watching first-quarter earnings reports, particularly how executives are forecasting the impact of tariffs on their businesses. The market is also on pace for its worst month since 2022.