Trump again "pressures" Powell to cut interest rates, US stocks face another "Black Monday"!

According to the Zhitong Finance APP, President Donald Trump has called for Federal Reserve Chairman Jerome Powell to cut interest rates, while increasing signs indicate that his trade war is pushing the U.S. economy to the brink of recession. As a result, U.S. stocks fell sharply, the dollar and long-term Treasury prices declined, while gold prices rose against the trend.

Last night, the S&P 500 index closed down 2.4%, the Nasdaq 100 index fell by 2.5%, and the Chicago Board Options Exchange Volatility Index (Cboe VIX) hovered around 34. Tesla's stock price plummeted 5.7% before the release of its earnings report on Tuesday; Sweetgreen (SG.US), a salad chain restaurant, saw its stock price drop 8.2% after announcing the departure of its Chief Operating Officer.

Trump's latest pressure on Jerome Powell has reignited concerns in the market about presidential interference in Federal Reserve policy. Since last week, a series of attacks from Trump has led people to question whether the Federal Reserve can maintain its political independence—an independence that is the cornerstone of confidence in the U.S. financial markets. Meanwhile, the latest data on the inflation indicators favored by the Federal Reserve remains above target levels.

During earnings season, Trump's erratic trade policies have made the market increasingly anxious, with the peak of earnings reports officially starting on Tuesday. Many companies have already lowered or canceled their annual performance forecasts, and analysts are hurriedly downgrading their profit growth predictions for large U.S. companies.

Marta Norton, Chief Investment Strategist at Empower, stated: "Today's stock price movements reflect three adverse factors: the backdrop of tariffs, poor earnings performance, and the president's renewed pressure on Chairman Powell. Trump's dissatisfaction with Powell has been longstanding, but his unexpected remarks on 'Liberation Day' on April 2 may have made investors realize that his statements on social media are more significant than ever."

Other U.S. assets have also seen a wave of selling. There is increasing skepticism about the U.S. status as the preferred destination for global capital and its long-term core role in the international financial system. The dollar exchange rate has declined, the Treasury market has shown mixed performance, with long-term Treasury prices falling while short-term Treasury prices have risen.

Multiple risks are intertwined, exacerbating market concerns about economic growth and inflation prospects, while also raising questions about how the Federal Reserve will balance the two. Although traders expect the U.S. to cut interest rates at least three times this year, former New York Fed President Bill Dudley pointed out in a Bloomberg column that policymakers may act more slowly than expected.

All 11 sectors of the S&P 500 index fell, with consumer discretionary and information technology sectors leading the declines.

Trump's contradictory trade policies continue to pressure the stock market. Since Trump announced significant tariffs on most U.S. trading partners (only to suspend several tariff measures a week later), the S&P 500 index has cumulatively fallen by 9%, down 16% from its historical high set in February. Nvidia's stock price fell by 4.5%, Delta Air Lines' stock price dropped by 3.4%, and Constellation Energy Group's stock price plummeted by 6.8%.

However, there are exceptions; streaming giant Netflix (NFLX.US) reported record profits in the first quarter, driving its stock price up by 1.5%. Meanwhile, Tesla (TSLA.US) saw a significant decline in its stock price, with Dan Ives from Wedbush Securities noting that the electric vehicle manufacturer is facing a "red alert" moment Mark Hackett, Chief Market Strategist at Nationwide, stated that the Trump administration has been unabashed in its calls for interest rate cuts, but "the ultimate outcome is difficult to predict." He added that the current situation is similar to that of 2018 and 2019, "however, like the tariff issue, this public pressure is likely aimed at influencing decisions through public opinion, as firing the Federal Reserve Chairman would undoubtedly trigger market turmoil."

Trump has openly criticized the Federal Reserve Chairman for being too slow in cutting interest rates. Although legal scholars believe that the president cannot easily dismiss the Federal Reserve Chairman, and Powell has no intention of resigning, the White House's stance on this issue still leaves investors worried.

Mike Reynolds from Glenmede stated, "There are concerns that forcing the Federal Reserve to cut rates through public opinion may backfire. We believe that the current leadership of the Federal Reserve will not be swayed by political factors in their decision-making and will continue to focus on achieving their dual mandate based on the information at hand."

Earnings season is still ongoing, with giants such as Tesla, Google's parent company Alphabet (GOOGL.US), Boeing (BA.US), and Intel (INTC.US) set to release their earnings reports this week. Tesla will announce its first-quarter earnings on Tuesday, as the electric vehicle manufacturer faces a brand crisis triggered by Elon Musk, while also dealing with uncertainties brought about by tariffs.

Michael Graham from Canaccord Genuity believes that the currently released earnings results are "mixed." In a report on Monday, Graham wrote, "The earnings reports from these companies have not fully reflected the impact of tariffs. Due to the pull-forward of expenses caused by tariffs and fluctuations in economic data, it may take several months to draw definitive conclusions."

Meanwhile, data compiled by Michael Wilson from Morgan Stanley shows that the breadth of earnings expectation adjustments for S&P 500 constituents (the ratio of analysts raising to lowering expectations) is at a rare level, approaching extreme lows outside of recession periods.

Sade Davis, President and CEO of Aureus, stated, "Over the past few weeks, the market has been digesting expectations of an economic slowdown, hoping that most of the adjustments have been completed. This week is crucial for U.S. corporate earnings, and professional investors will closely examine the earnings reports for signs of economic weakness."