US open: Banks fall as cyclical stocks slip on Trump-Powell spat

(Sharecast News) - US stocks opened flat to slightly lower on Monday as political and policy uncertainty weighed on risk appetite, pulling both the Dow and S&P 500 back from last week's record highs. By 1458 GMT, the Dow was trading 0.38% lower, while the S&P 500 slipped 0.06%, after the indices reached new all-time closing highs on Friday, with banking stocks providing a drag early on. The Nasdaq, meanwhile, was up just 0.03%, holding steady at a two-month high.

Market sentiment was focused on the long-running row between Donald Trump and Jerome Powell, which escalated on Sunday after the Federal Reserve chair said the Department of Justice had launched a criminal investigation into the $2.5bn renovation of the Fed's headquarters, and into his testimony about the project to the Senate banking committee in June last year.

"This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions, or whether instead monetary policy will be directed by political pressure or intimidation," Powell said in a video message.

The dollar index was down 0.3%, while gold and silver prices surged 2.2% and 7.3% to new record highs, as investors sought safe-haven assets amid the rise in political risk.

"Gold and silver are getting a further boost, not that they necessarily needed one," said AJ Bell investment director Russ Mould.

"President Trump's desire for lower interest rates, and antipathy toward Mr Powell, are both well-known, and, even if he is dismissing claims that the DoJ action is an attempt to influence the Fed, financial markets will look back at prior episodes of presidential pressure on policymakers with unease," he said.

Also weighing on sentiment was the rising conflict in Iran, amid speculation that Trump was considering military action against the country. Widespread protests were met with a violent crackdown by the Iranian authorities, leaving almost 500 people dead, according to human rights groups.

Abivax jumps on Eli Lilly reports

Shares in Nasdaq-listed Abivax were up 7% after reports emerged that pharma giant Eli Lilly was preparing a $17.5bn bid for the Paris-based biotech firm. According to French publication La Lettre, Indiana-based Eli Lilly is considering making a €15bn offer for the company, though is waiting to see whether French regulators would raised any issues with foreign investment.

Upmarket athleisure brand Lululemon was trading 2% higher after the company said that fourth-quarter results would be at the upper end of guidance due to a strong festive selling season.

UnitedHealth was one of the worst performers on the Dow after a Senate committee looking into the health insurer's practices alleged that it used aggressive tactics such as adding diagnoses to patient records to collect extra federal payments. The probe found UH "turned risk adjustment into a business, which was not the original intent."

Meanwhile, cyclical stocks were weaker as heightened political risk raised economic concerns. Stocks in the banking sector, in particular, were falling after of the opening bell, with heavyweights Goldman Sachs, JPMorgan Chase & Co, Bank of America and Citigroup all lower.