The stock market rose sharply on Wednesday with news of a potential de-escalation in the U.S. trade war with China and President Trump’s dismissal of any plans to fire Federal Reserve Chair Jerome Powell triggering a relief rally.
The Dow Jones Industrial Average soared over 1,000 points, or 2.6% in early trading, after making similar headway yesterday. The S&P 500 and tech-heavy Nasdaq Composite also made gains, climbing 168 points, or 3.2%, and 664 points or 4.1%, respectively.
Mr. Trump signaled yesterday that tariffs on China, which currently stand at 145%, would come down “substantially.” China has also imposed a high levies on American goods, with tariffs totaling 125%. The president also said on Tuesday he has “no intention of firing” Federal Reserve Chair Jerome Powell.
Hubert de Barochez, a senior markets economist at Capital Economics said Mr. Trump’s positive comments sparked a rebound but that 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.”
The market will “more likely than not continue to be dictated by Trump’s latest whims regarding tariffs and trade,” said Tim Waterer, chief market analyst at KCM Trade.
Stocks across Asia and Europe climbed in response to the news that there may be some tariff relief on the horizon. Indexes jumped 2.8% 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%.
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.
The president has also been in tariff talks with other foreign governments, including Italy and Japan. Last week, he said those talks could wrap up within a month’s time.
Tesla stock, which has been on a downward trajectory since December, jumped more than 4% on 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.
Treasury yields were climbing Monday morning, reaching 4.3% as of 10:30 a.m. Investors this week have also rushed to invest in gold, with the price of the precious metal reaching record highs at over $3,500 per ounce.
contributed to this report.
