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The S&P 500 closed higher on Tuesday as Wall Street looked beyond President Donald Trump’s removal of Federal Reserve Governor Lisa Cook from the central bank’s board and awaited quarterly figures from chip giant Nvidia.
Shares of the artificial intelligence chip darling were about 1% higher Tuesday, extending their meaningful gains seen in the prior two sessions.
The Dow Jones Industrials changed course and gained 135.91 points to close Tuesday at 45,418.38.
The broad market added 26.58 points to 6,465.90.
The NASDAQ gained 94.98 points to 21,544.27.
Long-term Treasury yields rose after the Trump move, while short-term yields declined as investors steepened the yield curve on the notion rates may go lower in the short-term, but eventually go higher as a politicized Fed becomes less attentive to inflation.
Trump’s unprecedented move adds to the pressure the president has been putting on the central bank’s independence. By law, a president may only remove Fed governor “for cause.” Cook plans to file a lawsuit challenging her removal by the president, her attorney said. The Fed said it “will abide by any court decision” on the matter.
There are currently six members on the Fed’s board, with one seat vacant after the resignation of Adriana Kugler earlier this month. Removing Cook would leave five members, with non-Trump appointees still holding a majority.
However, if Stephen Miran is cleared for the Kugler vacancy and the president is successful in removing Cook, it would give Trump a 4-3 majority.
If Fed Chair Jerome Powell leaves his seat voluntarily after his term expires in May, it would give the president a fifth vote.
Prices for 10-year Treasury regained lost ground Tuesday, lowering yields to 4.26% from Monday’s 4.28%. Treasury prices and yields move in opposite directions.
Oil prices docked $1.46 to $63.34 U.S. a barrel.
Gold prices hiked $21.00 at $3,438.50 U.S. an ounce.
