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Markets recover after brief selloff on Powell firing

reports

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Indexes close up: Dow 0.53%, S&P 500 0.32%, Nasdaq 0.26%

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Nasdaq posts fifth record high in last six sessions

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Bank stocks mixed after Q2 earnings

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US June PPI unchanged on a monthly basis

(Adds closing prices, further analyst commentary)

By David French

July 16 (Reuters) - Wall Street benchmarks closed

modestly higher on Wednesday, with the Nasdaq Composite

achieving 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 benchmark S&P 500 and Nasdaq fell

more than 1%, while 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, with the Nasdaq

Composite closing at 20,730.49, a gain of 52.69 points,

or 0.26%. It was the fifth session in six that the

technology-heavy index has posted a record high.

The Dow Jones Industrial Average rose 231.49 points,

or 0.53%, to 44,254.78, and the S&P 500 gained 19.94

points, or 0.32%, at 6,263.70.

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.

CalBay's Bell said while volatility risk from news headlines

would persist, the overall positive state of the U.S. economy

was a more important factor in driving investor moves.

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.

This concern was iterated by Atlanta Fed President Raphael

Bostic on Wednesday, saying in a Fox Business interview that

pressures may be building in the wake of rising import taxes.

Inflation has been in focus this week. Producer prices

data released on Wednesday showed growth 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 ) climbed 0.9% after notching a 22%

earnings surge, while Bank of America ( BAC ) and Morgan Stanley ( MS )

declined 0.3% and 1.3%, respectively, despite posting

higher profits.

Johnson & Johnson ( JNJ ) soared 6.2%, and was the

second-best performer 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 0.4%, from the 12-month high recorded on Tuesday.