Consumers' inflation expectations, by some measures, are also the highest in decades. Inflation has been above the Fed's 2% target for over four years, and the prospect of a dovish Fed under the stewardship of a new Trump-friendly Chair could keep it that way.

This past April, when President Donald Trump started flirting with the notion of firing Fed Chair Jerome Powell, stocks and the dollar tumbled because investors worried that even talking about such a move crossed a red line.

PepsiCo jumped 7.5% after delivering revenue and profit that topped Wall Street’s expectations. The drink and snack giant also stood by its financial forecasts given in April, which projected lower full-year profit than previous forecasts due to increased costs from tariffs and a pullback in consumer spending.

A healthy crop of earnings helped European stocks bust out of a four-day losing streak on Thursday, Wall Street was watching Netflix and the dollar bounced after U.S. President Donald Trump quashed talk he was about to fire Fed head Jerome Powell.

What Happened in Markets Today The debate on the Fed continued. Former Federal Reserve governor Kevin Warsh, a potential nominee to succeed Fed Chair Jerome Powell, said on CNBC that the Fed should stay independent.

Federal Reserve Chair Jerome Powell on Thursday said the agency’s renovation of its office complex in Washington complies with plans approved by a local commission, disputing a White House suggestion that they had violated the law by deviating from those plans.

By Stella Qiu SYDNEY (Reuters) -Asian shares tracked Wall Street higher on Friday as still-strong U.S. economic data and robust corporate earnings offset tariff worries, while the yen headed toward a second successive week of loss ahead of Japan's upper house election.

Many on Wall Street have privately worried that political pressure will undermine the Federal Reserve’s credibility.

The S&P 500 is on the cusp of a new record high following the central bank’s dovish forecast on interest rates. But some market watchers are questioning the durability of the rally.

The Nasdaq rose to a record high on Thursday, leading a cautious climb across Wall Street's major indexes, as strong economic data lifted spirits and airline stocks took off on United Airlines' results.