Dow Jones Industrial Average pulls back after Trump targets Fed Chair Powell

• The Dow Jones gained ground early Wednesday before falling back into 44,000.
• Markets are on high alert after President Trump took another step toward end Powell's term early.
• Despite the lack of legal precedent, the Trump administration is full of White House "firsts".

The Dow Jones Industrial Average (DJIA) rose early Wednesday after United States (US) Producer Price Index (PPI) inflation remained on the cooler side, bolstering market confidence in a Federal Reserve (Fed) rate cut sooner rather than later. However, US President Donald Trump was quick to cut the sentiment festivities short by signaling to the US government that he's looking for a way to end Fed Chair Jerome Powell's tenure as head of the Fed early.

Trump waffles on shots at Powell, but intent remains

Equity markets recovered some footing after President Trump pivoted to a half-hearted statement that he's "not planning on doing anything" about Fed Chair Powell at the moment, however brandishing a termination letter written specifically for the Fed head in front of Congress on Wednesday sent a clear signal that Trump is looking for an avenue to terminate Powell's position as head of the Fed. The President's office has no legal framework (or even jurisdiction) to terminate the Fed officials; however, Donald Trump's actions serve as a signal to Congressional Republicans to get on board and allow it to happen: President Trump has made skirting legal and ethical roadblocks a habit for his administration.

US PPI inflation came in well below expectations on Wednesday, bolstering general market sentiment as traders tilt back into rate cut hopes. Core June US PPI came in at 2.6% YoY, well below the previous print of 3.0%, sparking renewed hopes that tariff impacts might continue to remain muted.

Cooling business inflation doesn't mean consumers save money

However, hopes for a rate cut haven't fully seeped into rate watchers' books just yet. According to the CME's FedWatch Tool, rate traders are still pricing in around a 40% chance of another hold on rate cuts in September, and the odds of a follow-up cut before the end of the year remain in question.

Read more stock news: US stocks gyrate wildly after Trump wavers on firing Fed's Powell

Dow Jones price forecast

Despite firm resistance from buyers, the Dow Jones continues to test lower ground after running into a technical ceiling just below 45,000 earlier this month. The Dow is now battling the 44,000 handle, and the major equity index could see fresh declines if the line doesn't hold.

Bearish momentum could still have some room to run as technical oscillators continue to walk down from overbought conditions, and the closest major price support is baked into the 50-day Exponential Moving Average (EMA) near 43,095.

Dow Jones daily chart