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Indexes up: Dow 0.3%, S&P 500 0.18%, Nasdaq 0.13%

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Markets recover after brief selloff on Powell firing

reports

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Bank stocks mixed after Q2 earnings

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U.S June PPI unchanged on a monthly basis

(Updates with mid-afternoon prices, analyst comment)

By David French, Suzanne McGee and Pranav Kashyap

July 16 (Reuters) -

Wall Street benchmarks rebounded modestly on Wednesday,

after a chaotic half hour when media reports suggested U.S.

President Donald Trump was set to fire Federal Reserve Chair

Jerome Powell.

Shortly before midday, the main U.S. stock indexes fell

sharply, the dollar plunged and Treasury yields rose after

Bloomberg News reported the possibility of replacing Powell,

citing an unidentified White House official.

Separately, Reuters News reported, citing a source, that

Trump was open to the idea of firing Powell.

Trump was quick to deny the reports, even as he unleashed a

new barrage of criticism against the Fed chair for not cutting

interest rates.

"One purpose of this, I suspect, was testing the market to

see how it feels about this scenario," said Alex Morris, chief

investment officer at F/m Investments.

Trump's denial revived equity markets after the benchmark

S&P 500 fell as much as 1% and the Nasdaq dropped as much as

1.1%.

As of 2:31 p.m. ET, the Dow Jones Industrial Average

rose 133.13 points, or 0.30%, to 44,156.42. The S&P 500

increased 11.36 points, or 0.18%, to 6,255.12, and the Nasdaq

Composite gained 26.92 points, or 0.13%, at 20,704.72.

Investors had been on edge for weeks about the prospect

of Powell being removed from his job before his term ends next

May, as Trump has repeatedly criticized him for not cutting U.S.

rates quickly enough.

The CBOE Volatility Index, Wall Street's "fear

gauge," hit a more than three-week high in the wake of the

initial Powell reports, but eased from those levels.

Despite Trump's demands for easier credit, Fed officials

have resisted cutting rates until there is clarity on whether

his tariffs on U.S. trading partners reignite inflation.

The chance of a rate cut in September was viewed around

56% earlier in the day, according to CME FedWatch.

Before the Bloomberg report, the session was choppy as

investors were on edge after a mixed bag of inflation data

muddied the economic outlook. Producer prices flatlined in June,

as tariff-driven goods costs were balanced out by weaker service

prices.

Just a day earlier, unexpectedly strong consumer inflation

had already dented hopes for deeper Fed rate cuts, with Trump's

tariffs partly fueling the uptick in prices.

On Wednesday, the second day of this earnings season,

another round of stronger profits from Wall Street's big banks

failed to ignite their own stock prices.

Goldman Sachs ( GS ) inched 0.4% higher after notching a 22%

earnings surge.

Both Bank of America ( BAC ) and Morgan Stanley ( MS )

joined the trend of higher profits fueled by trading desks

navigating market turbulence in the second quarter. Their shares

were trading, respectively, down 0.6% and 2.2%.

Semiconductor stocks were sluggish after news that

Nvidia ( NVDA ) would be allowed to sell its H2O chips in China

had fueled gains in the previous session. The semiconductor

index was 1.2% lower, having hit a 12-month high on

Tuesday.