*

Major Wall Street indexes close at record highs from lower

start

*

Powell accuses government of using legal system against

Fed

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Dollar loses its 'New Year bounce'

*

Gold hits record $4,600 an ounce, oil hits 7-week high

(Updates with closing prices)

By Isla Binnie

Jan 12 (Reuters) -

Wall Street stock indexes and U.S. government bonds steadied

on Monday as traders digested the Trump administration's threat

to indict the Federal Reserve, although renewed questions about

the independence of the world's most influential central bank

weighed on the dollar and boosted gold.

Fed chair Jerome Powell delivered an unusually

full-throated rejection of the ‌Department of Justice's service

of grand jury subpoenas, adding to what Morgan Stanley analysts

called a "cacophony of market-moving events" to start what is

only the second full week of 2026.

Trump's statement that he was considering military ​action

after a crackdown on protests in Iran added further potential

tension following the capture of Venezuela's Nicolas Maduro and

suggestion the U.S. could try to ‍acquire Greenland.

The benchmark S&P 500 and blue-chip Dow Jones

Industrial average inched up 0.16% and 0.17% respectively to

record closing ⁠highs of 6,977.27 and 49,590.20.

The Nasdaq ⁠Composite rose 0.26% on the day, buoyed

by retail giant Walmart, which moved its listing there last

month.

The yield on benchmark U.S. 10-year notes

rose 1.8 basis points to 4.189%, having touched 4.207% during

the ‌session.

"Any time you have a new angle on something, the market

reads it, trades ​on it a little bit, it has to digest it, and

then it realizes this is just new news that's consistent with

prior events that have come out," said Jim Barnes, director of

fixed income at Bryn Mawr Trust in Berwyn, Pennsylvania.

"It feels ⁠as if the Fed is a tough institution to break,

and so this ‍is going to ​keep going on, though it's not going to

go away, the persistencies will probably be there and the market

is just going to have to take it in stride."

The dollar felt some pain, with the index that

measures the greenback against a basket of major currencies,

falling ‍0.34% to 98.90, with the euro up 0.25% at

$1.1666.

"This just ended the dollar's New Year bounce," said Marc

Chandler, chief market strategist at Bannockburn Global Forex in

New York. "The subpoenas have probably overwhelmed the

geopolitics."

Gold hit a record high above $4,600 an ounce

during the session but retreated to last be seen 1.84% higher at

$4,592.55.

Oil prices settled at seven-week highs on concerns about

disruption in Iran, which outweighed prospects for more supply

from Venezuela, whose oil exports have long been bound by

sanctions.

Brent futures rose 53 cents, or 0.8%, to settle at

$63.87 a barrel. U.S. crude rose 38 cents, or 0.6%, to

settle at $59.50. It was Brent's ​highest settlement since ‍Nov.

18 and WTI's highest since Dec. 5.

CREDIT CARD RATE CAP RATTLES INVESTORS

Stock in lenders and credit card firms fell harder than other

sectors, after Trump's call on Friday for a one-year cap on

credit card interest rates at 10% starting on Jan. 20.

Citigroup ( C/PN ) tumbled. ​Credit-card firm American Express ( AXP )

also fell, as did consumer finance firms, including

Capital One.

"Based on very preliminary calculations, Citi would have

the highest hit and next US Bancorp," JPMorgan ( JPM ) analysts said in

a note, explaining that US Bancorp "has credit card loans with

higher rates, implying that it has more subprime customers."

Closely watched developments to come this week include U.S.

inflation data, trade figures from China and a slew of U.S.

earnings beginning with JPMorgan ( JPM ) and BNY on

Tuesday.

Markets will continue to weigh the dramatic escalation in

the fight between Powell and Trump, which dates back to the

banker's first years as chair in 2018.

"Trump is pulling at the loose threads of central bank

independence," said Andrew Lilley, chief rates strategist at

Barrenjoey, ​an investment bank based in Sydney.

"Investors won't be happy about it, but it shows actually

Trump has no other levers to pull. The cash rate will stay what

the majority of the FOMC wants them to be."

Deutsche Bank analysts totted up the various factors markets

will have to weigh. "Remarkable stuff and, all in all, plenty of

opportunities for big headlines over the coming days," they ‍said

in a note.

(Additional reporting by Karen Brettell, Scott DiSavino, Medha

Singh, Pranav Kashyap, Tom Westbrook and Ankur Banerjee; Editing

by Alexander Smith, Chizu Nomiyama and Andrea Ricci)