The stock market surged early Wednesday but then steadily lost momentum as investors digested news
of a possible trade deal with China and President Trump’s dismissal of any plans to fire Federal Reserve Chair Jerome Powell.
After gaining more than 1,000 points in early trade, the Dow Jones Industrial Average closed up 420 points, 1.1%, to close at 39,607. Wednesday marked the second consecutive day the index soared over 1,000 points.
The S&P 500 gained 88 points, or 1.7% to close at 5,376, while the Nasdaq Composite rose 2.5%.
“Stocks saw strong gains as Trump backed off his Powell threats and opened the door further to a China trade/tariff détente,” Adam Crisafulli of Vital Knowledge wrote in a research note. “However, the SPX faded from its high in the afternoon as investors worry that the White House’s tariff retreats won’t fully eliminate the enormous trade headwinds facing the economy.”
Treasury Secretary Scott Bessent on Wednesday said the Trump administration has an “opportunity for a big deal” on trade with China, a day after Mr. Trump signaled tariffs on China would come down “substantially.”
Capital Economics projects the U.S. will lower import taxes on Chinese goods to as low as 60%. If Mr. Trump acts quickly to lower tariffs on China and brings them down low enough, investors believe a recession could be averted.
Investors were also cheered by the president’s remark on Tuesday that he has “no intention of firing” Federal Reserve Chair Jerome Powell.
“You know things have reached crescendo when not firing the Fed Chair was the catalyst for a rally,” said Jamie Cox, managing partner at Harris Financial Group.
Hubert de Barochez, a senior markets economist at Capital Economics, said Mr. Trump’s positive comments sparked a rebound, but added it remains to be seen how long the markets will ride that wave.
“Both U.S. equities and government bonds have staged a relief rally over the past 24 hours, as concerns about Fed independence and the trade war have eased,” he said. “But the fact that the rally was sparked largely by conciliatory remarks from U.S. President Trump — whose rhetoric is notoriously volatile — raises questions about its durability.”
Stocks across Asia and Europe climbed in response to the news that there may be some tariff relief on the horizon. Indexes jumped 2.1% in France, 2.4% in Hong Kong and 1.9% in Japan.
This follows a gloomy report from the International Monetary Fund released yesterday that said the global economy will slow this year, citing the trade war as the driving force for the slowdown. The IMF projected global growth of 2.8%, down from 3.3% in January. U.S. growth is also expected to decline a full percentage point from last year to 1.8%.
Tesla stock, which has been on a downward trajectory since December, jumped more than 5% Wednesday after CEO Elon Musk told investors on an earnings call Tuesday that he’s scaling back his work at the Trump administration’s Department of Government Efficiency, or DOGE.
Tesla’s sales and profits tumbled this quarter, according to the company’s earnings report yesterday.
10-year Treasury yields climbed Wednesday, settling around 4.4%. Gold prices, on the other hand, plunged after reaching record highs earlier this week.
contributed to this report.
