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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 to the close, adds analyst comment)

By David French

July 16 (Reuters) - Wall Street benchmarks ended

modestly higher on Wednesday, with the Nasdaq Composite posting

its latest record finish, despite a chaotic half hour when news

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 Powell for not cutting interest

rates.

"The Fed's independence is hugely important to our overall

economy, so you saw the market react when that initial headline

came out," said Dylan Bell, chief investment officer at CalBay

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%.

According to preliminary data, the S&P 500

gained 19.65 points, or 0.31%, to end at 6,263.41 points,

while the Nasdaq Composite gained 51.82 points, or

0.25%, to 20,729.62. The Dow Jones Industrial Average

rose 220.61 points, or 0.50%, to 44,243.90.

It was the fifth session in six that the

technology-heavy Nasdaq index has posted a record close.

Since Trump's April tariff announcement, which initially

sent U.S. equities into a spin, U.S. stock markets have been on

a tear. The S&P 500 most recently posted a record finish last

week.

Amid this buoyancy though has been investor angst 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 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

both declined though.

Johnson & Johnson ( JNJ ) soared, and was one of the best

performers on the S&P 500, after halving its expectations for

costs this year related to new tariffs and raising its full-year

sales and profit forecast.

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

slipped from the 12-month high recorded on Tuesday.