← The Rundown
The Rundown
DOJ Launches Criminal Investigation Against the Fed, Trump Calls for 10% Interest Rate Cap on Credit Cards
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Public.com presents the rundown, your daily market update in under 10 minutes. My name is Zaydad Mani, and Today is Monday, January 12th. In today's episode, we'll tell you why Jerome Powell is under investigation by the doj. We'll also tell you about Google's plans to monetize their AI tools. Then stick around to the end of the show to find out why people were not happy with the Golden Globes last night. We got a great show for you today. Let's go. Markets are off to a hot start this year. The S P 500 jumped 1.6% last week to close at record highs. The Nasdaq did Even better, adding 1.9%. Both these indices had their best week since November. You know, investors are feeling pretty bullish right now about the economy and it's not just because of AI anymore. In fact, the tech sector is actually the second worst performing sector so far this year. And instead, this rally is starting to broaden out. Small cap stocks are starting to get some love. The Russell 2000, which tracks smaller companies, is already up 6% this year and sitting at record highs. You know, whenever small caps start rallying, this usually a sign that investors are feeling more confident about the overall economy. Now, all that being said, we did get some news on Sunday night that could shake things up. Fed Chair Jerome Powell released a written statement and posted a video on X saying that the Department of Justice has opened a criminal investigation into him related to the $2.5 billion renovation of the Federal Reserve's headquarters in Washington, D.C. now, I watched this video on Sunday night. Powell was still rocking his iconic purple tie, but he did look very serious in that video. Jerome Powell straight up said that this is a politically motivated investigation, that he's being targeted by the Trump administration because the Federal Reserve has refused to cut interest rates as aggressively as President Trump has publicly demanded. Also in that video, Jerome Powell denied any wrongdoing and he said he plans to fight fight these allegations. So I don't think he plans to step down before his term expires in May. And this is pretty big news because remember, the Fed is designed to operate independently from political pressure. The independence from the Fed is a cornerstone of the US Financial system. Investors trust that interest rates decisions are based on data and not politics. So every time Trump tries to attack the Fed's independence like he did last year by threatening to fire Jerome Powell, and now this, investors get a little nervous. In fact, stocks are down in pre market trading while gold is moving higher and hit all time highs of $4,600 an ounce. So we'll see how this plays out. We'll see if the Justice Department moves forward or if they back off. By the way, speaking of the Fed's independence, in my interview with Andrew Ross Sorkin, one of the topics we covered was the Fed's independence and Trump's power and influence on the economy. That interview was posted on Sunday. It did come out a little bit later than usual, but it was a great conversation. I highly recommend checking it out if you guys missed it. And if you're new here, it's a great time to get subscribed to the podcast because there's a lot going on in the markets right now. We're going to be breaking it all down every morning, so make sure you guys are tuning in every day to stay in the loop. Let's run through some headlines, starting with Google Google is bringing personalized ads into its AI shopping tools. Here's how it's going to work. When a user is using AI mode on Google, which is powered by Google's Gemini, advertisers will be able to show exclusive offers at the exact moment that the AI thinks a shopper is close to making a purchase. In order to improve conversions, the AI will determine whether to offer discounts and free shipping or special bundles. Now I think this is a pretty interesting development. It could open up a way for Google to start monetizing its AI offerings outside of the monthly subscription. You know, it's pretty obvious that every AI company, including Google, OpenAI and others, are going to have to embrace ads to further monetize. And the shopping and e commerce space seems to be the low hanging fruit. Now I think this is going to work. I don't know about you guys, but I use Gemini and ChatGPT all the time now when it comes to researching products before I buy them. So it makes sense for these companies to start integrating these ads directly into the platform now. Over time it could lead to people not trusting the AI result as much if we're just bombarded with ads, but we'll have to see how it all plays out. By the way, Google also announced over the weekend that they are teaming up with Walmart, the world's largest retailer. Shoppers will soon be able to use Gemini as an assistant to find, compare and buy products directly from Walmart and Sam's Club. Don't forget, Walmart also announced a similar type partnership with OpenAI back in October that lets shoppers use Instant checkout inside ChatGPT to buy stuff from Walmart. So Walmart as a retailer seems to be fully embracing AI to drive more sales. Walmart stock is up more than 2% this morning and near all time highs. Let's shift gears and talk about another Trump related story that has Wall street on edge. Late last week, President Trump called for credit card interest rates to be capped at 10%, saying that lenders would be in violation of the law if they didn't comply. Trump made these comments in a post on Truth Social and he blast at banks for what he called ripping off Americans by charging 20 to 30% interest on credit card balances. Now, according to Trump, this cap of 10% would go into effect on January 20th. But here's the thing. Doing something like that requires the approval of Congress. Wall street analysts and legal experts say the president can't unilaterally impose a nationwide credit card rate cap via an executive order. But here's the thing. Affordability is a key political issue right now. US household debt is sitting at record highs hitting $18.5 trillion as of September of last year. And credit balances are a huge part of that. But as you can imagine, there's going to be a lot of pushback from banks and lobbyists because this is a huge money maker for bank lenders and credit card companies. The argument from critics on a 10 cap is that it would cause millions of consumers to lose access to credit altogether. Essentially, credit card companies wouldn't issue credit cards to people with low credit scores. So yeah, investors are freaking out right now. Shares of American Express are down 4%. Capital One is down more than 8%. But on the flip side, Buy Now, Pay later companies like Affirm and Klarna are up in response to this news because tighter lending standards for banks could cause consumers to increasingly seek alternative options like Buy Now, Pay Later. So we'll see what ends up happening. But I don't think that a 10% interest rate cap is going to be implemented starting January 20th. Let's talk about some stocks making moves today. Shares of Sun Country Airlines are soaring this morning after Allegiant Air announced that it will acquire the airline in a $1.5 billion cash and stock deal. Now both these airlines operate in the ultra low cost space, mostly flying leisure travelers to vacation destination. You know, I've actually taken both of these airlines to Florida and Vegas and it's a pretty good value. Now as a combined company, the airlines plan to add more than 100 new routes and expand access to underserved cities and also open door to more domestic and eventual international vacation destinations. Allegiant also says this deal would strengthen their loyalty and reward program, which is a sneaky important part of an airline business. Sun country is being acquired for $18.89 per share and their stock is up 50, 15% this morning. Now on the flip side, Abercrombie and Fitch stock is getting crushed this morning after the retailer cut back its Q4 and full year sales guidance, which could be an early sign that the holiday sales might be underwhelming. Now, we won't get Abercrombie's full earnings report until March, but for now, investors weren't loving the guidance being lowered and as a result, the Stock is down 17% in pre market trading. Let's wrap the show with the fun fact. The Golden Globes award show was last night and one thing that caught my eye was their partnership with the prediction market platform polymarket. This integration was everywhere on the broadcast light. Now because of this partnership, throughout the broadcast they were flashing live Poly Market odds on screen and showing who was favored to win different awards before the envelopes were open and many people didn't like it. Now, to be fair, I didn't actually watch the show myself. I was watching NFL playoffs instead, which also had a ton of gambling ads. But I did see some outrage online about the polymarket Golden Globe partnership. Viewers were calling this integration cringe and dystopian and a new low for award shows. You know, I've said this before. I think that prediction markets are interesting, but I think it needs to be clear that it's just another form of gambling. It's not like investing in the stock market. And I think that's where the lines get blurred because prediction markets are marketed as some sort of alternative form of investing. And I think people are getting tired of these prediction markets being everywhere now. You know, we're seeing these prediction markets and award shows, but also sports and even the news. So I think there's starting to be a backlash of it being pushed so much. Not to mention there seems to be rampant insider trading on these platforms as well. But honestly, I don't think this is going to slow down anytime soon. Let me know what you guys think. Think in the comments. Do you have a problem with these prediction markets just being everywhere now? And I have to do one more plug here, but I actually asked Andrew Ross Sorkin on his thoughts on prediction markets and their partnership with cnbc. So if you want to hear what he had to say, go check out the interview. Well, all right, guys, that's the rundown for today. Hope you guys enjoyed today's episode. If you're watching the video version of today's show, you can see that I'm in a different spot than my normal recording studio. Me and the wife had a weekend getaway to Costa Rica where which has been incredible, but I will be back in Houston later today and be back in my normal recording studio for tomorrow's show. By the way, if you guys enjoyed today's show, consider giving us a five star rating on Apple, Spotify, YouTube, wherever you listen to your podcast. And if you are listening on Spotify, don't forget to vote in today's Spotify poll. Leave us a comment on Spotify. All that engagement really does help us out and it helps other people find the show. Thank you guys so much for listening, watching and commenting. Shout out to Mike and Connor for all the work behind the scenes and we'll see you guys back here tomorrow.