Good morning. Andrew here. The fallout from the criminal investigation into Jay Powell, the Fed chair, continues. Yesterday, I mentioned that the silence from business leaders was conspicuous. Yet several Republican lawmakers have now criticized the Trump administration’s move, with one senator threatening to hold up the confirmation process for all Fed nominees. In a show of force, all of the living former Fed chairs and some former Treasury secretaries — including Hank Paulson — denounced the investigation. And new reporting suggests that the current Treasury secretary, Scott Bessent, raised questions about the call directly with President Trump. More below. (Was this newsletter forwarded to you? Sign up here.)
“A mess”A powerful Republican on the Senate Banking Committee. The president of the New York Fed and former central bank chiefs. Bond traders and the meme-stock army. The resistance to the Trump administration’s latest threat to Jay Powell, the Fed chair, continues to grow. Powell’s unusually forceful public response, in which he accused the administration of using threats of a federal criminal investigation into him as “pretexts” to potentially influence the Fed’s interest rates policy, has been effective in rallying widespread support behind him. The big question: Could the investigation of Powell ultimately backfire on President Trump and his apparent bid to exert more control over the central bank? The latest: S&P 500 futures were down slightly this morning, and the U.S. dollar has rebounded. But keep an eye on the bond market. The yield on the 10-year U.S. Treasury, which tends to underpin mortgage rates, was at 4.2 percent. It has climbed since Powell, who has sought to avoid a direct clash with the White House, released the SOS dispatch on Sunday. (Worth reading: The Washington Post looks into the Powell investigation, including the role of Bill Pulte, a top housing official in the Trump administration.) Could the markets rein in the president? Trump, whose domestic policy agenda has shifted to combat an affordability crunch with proposals like a 10 percent cap on credit card interest rates, has repeatedly bullied Powell about lowering borrowing costs. But the bond market appears to be sending the White House a different message: Don’t mess with the Fed. “Ironically, if the ultimate aim is to reduce yields, it could have the opposite impact,” Jim Reid, a strategist at Deutsche Bank, wrote this morning to investors about the investigation. And then there’s Scott Bessent. The Treasury secretary told Trump on Sunday night that the investigation into Powell “made a mess” that could destabilize financial markets, according to Axios. “The secretary isn’t happy, and he let the president know,” an unnamed source told the publication. (A Treasury representative said that “there is zero daylight” between Bessent and Trump.) Other factors that could stymie Trump:
JPMorgan Chase’s quarterly profit falls. The bank reported $13 billion in net income for the fourth quarter, down 7 percent year-on-year — though that was largely driven by the lender increasing loss reserves as it prepares to take over the Apple credit card business from Goldman Sachs. Otherwise, JPMorgan’s core businesses performed mostly strongly, and its C.E.O., Jamie Dimon, said the U.S. economy “has remained resilient.” December inflation data lands today. Analysts expect the Consumer Price Index report to show that core inflation, which excludes volatile food and fuel prices, rose 0.26 percent month-on-month, a jump that could lead Fed policymakers to hold rates steady. Over all, analysts expect inflation to have edged up 2.7 percent year-on-year. The readout will be the first to give a more complete picture of inflation after several months of partial and delayed reports because of the government shutdown in the fall. Tariffs return to center stage. President Trump said that he would impose a 25 percent tariff on goods from any country “doing business” with Iran — a group that could include China, India and Turkey — as he increased pressure on Tehran over its severe crackdown on protesters. Separately, Washington is reportedly nearing a trade deal with Taiwan, and Trump warned on social media that “WE’RE SCREWED” if the Supreme Court overturns tariffs he imposed under the International Emergency Economic Powers Act. Paramount steps up its efforts to thwart Warner Bros. Discovery’s planned sale to Netflix. Paramount said it intended to begin a proxy fight to nominate directors to Warner Bros. Discovery’s board after the studio rejected its latest takeover bid. Paramount also sued to force Warner Bros. Discovery to release more details about how it valued its merger agreement with Netflix. Google’s A.I. mojo rolls onDespite the drama over the Fed, stocks have held up well. The reason is easy to guess: artificial intelligence. Investor belief in the potential growth of A.I. giants — and in particular Google, which is on a monthslong tear — appears to be on the rise again, even as the road map for the technology faces big challenges, including funding big new data centers. Google formally clinched a big win: powering Apple’s A.I. tools. The iPhone maker announced yesterday that it would rely on Google’s Gemini models to power Apple Intelligence, its A.I. system, including an upgraded version of the Siri digital assistant. (Bloomberg previously reported that Apple planned to pay about $1 billion a year for the arrangement.) For investors, the move appeared to underscore Google’s comeback in A.I., after it lost ground to OpenAI in the chatbot wars. The Apple news propelled Google into the $4 trillion market capitalization club; shares in the tech giant’s parent, Alphabet, closed up more than 1 percent yesterday.
But Google still faces speed bumps. The company only narrowly avoided being broken up by the federal judge in an antitrust trial over its Chrome browser, and the sheer size of the tech giant remains a political sword of Damocles over its head. Elon Musk wrote of yesterday’s news, “This seems like an unreasonable concentration of power for Google.” Google wasn’t the only A.I. company to promote its ambitions yesterday. Meta announced that it had hired Dina Powell McCormick, a veteran of Washington and Wall Street, to become its new president. In short: She’ll become the Facebook and Instagram parent company’s top in-house deal maker, especially when it comes to securing backing from what Mark Zuckerberg, its C.E.O., called “governments and sovereigns” to expand the company’s A.I. infrastructure. How big are Meta’s A.I. ambitions? More from Zuckerberg: Meta is planning to build tens of gigawatts this decade, and hundreds of gigawatts or more over time. How we engineer, invest, and partner to build this infrastructure will become a strategic advantage. That kind of scale will almost certainly draw on Powell McCormick’s ability to get government backing for its projects. At least one world leader seemed excited by the news: President Trump, for whom she worked in his first term. That could be crucial as Trump outlines expectations for tech giants to pick up more of the cost of rising energy bills associated with data centers. But Meta has challenges of its own, including keeping investors mollified about the costs of its huge spending plans. One of the steps the company is taking on that front is further layoffs, this time in its Reality Labs division that focuses on the so-called metaverse. A fusion start-up hits a key milestoneThe Department of Energy wants a SpaceX for fusion energy. To get there, it’s borrowing from the NASA playbook that helped launch the commercial space business, awarding $46 million in conditional funding to eight fusion start-ups as part of a fusion milestone program announced in 2023. One of those companies, Thea Energy, has become the first to hit a key benchmark: initial design approval of its fusion power plant by the Energy Department, Niko Gallogly is first to report. A nuclear renaissance: Surging demand for power from data centers has put nuclear energy back in the spotlight. While fission powers existing nuclear plants, scientists and investors are also chasing fusion, a process that combines atoms rather than splitting them. Fusion has the potential to produce vast amounts of energy without fission’s radioactive waste, but it has proved much harder to achieve. The Trump family recently entered the business when Trump Media & Technology Group, the company that owns Truth Social, announced a merger with the fusion company TAE Technologies. Start-ups are betting on different architectures in the race to generate fusion power. Thea, based in Kearny, N.J. and spun out of Princeton’s Plasma Physics Lab, intends to build a so-called stellarator power plant — a type of nuclear fusion reactor that confines plasma using magnets to combine atoms. Thea needs a lot more cash to move forward. Analysts estimate that building a fusion plant would cost several billion dollars. Thea has so far raised $30 million, according to PitchBook, well behind leading competitors like Commonwealth Fusion Systems and TAE Technologies. In his quest to secure more funding, Thea’s C.E.O., Brian Berzin, is urging the Energy Department to create an additional stage of the milestone program that would award a total of $2 billion to companies that achieve certain benchmarks. Without additional support, Berzin told DealBook, “other countries in the world will be doing more than us, and they’ll be accelerating their development where we’re stagnating.” Zoom out: If fusion follows a similar model to fission, only a few companies will build their own power plants, Guy Cohen, a senior researcher at Sightline Climate, told DealBook. That leaves the best-funded start-ups in the greatest position to build and own fusion infrastructure. There’s a risk that smaller start-ups like Thea could “end up being acquired for I.P., licensing some component they specialize in, or becoming a supply chain company,” he said. We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
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