NEW YORK — U.S. stocks experienced a notable surge on Wednesday, taking cues from a worldwide rally that buoyed Wall Street after President Donald Trump took a softer stance in his critiques of the Federal Reserve and toned down his rhetoric in the ongoing trade war.
The S&P 500 advanced by 1.7%, contributing further to Tuesday’s substantial gains, which had already offset Monday’s sharp decline. Meanwhile, the Dow Jones Industrial Average increased by 419 points, or 1.1%, while the Nasdaq composite saw an encouraging rise of 2.5%.
These optimistic movements on Wall Street mirrored strong stock performances across Europe and Asia. The market’s recent fluctuations have echoed the growing tension among investors as they navigate through uncertainties tied to Trump’s economic policies.
Wednesday’s shift upwards was partly attributed to Trump’s comments on Tuesday evening, where he affirmed he had “no intention” of dismissing Federal Reserve Chair Jerome Powell. Previously, Trump had publicly expressed frustration towards Powell, whom he accused of being a “major loser,” mainly due to the Fed’s cautious stance on reducing interest rates.
Investors’ concerns were heightened by Trump’s harsh words, given the Federal Reserve’s independence is crucial for making decisions that might be challenging in the immediate future but ultimately beneficial in the long run. Although a rate cut from the Fed could invigorate the economy, it could also lead to heightened inflation. Experts suggest that Trump’s tariffs might decelerate the economy and briefly increase inflationary pressures.
Trump may have realized the apprehension in the market regarding Powell’s position, according to Thierry Wizman, a strategist at Macquarie. There’s also speculation that Trump wants to retain someone whom he could later hold responsible if an economic recession unfolds.
“Indeed, if the Fed shows aggressive interest rate cuts, Trump would have scant justification for a recession outside of his confrontational tariff strategies,” Wizman explained.
Markets received further uplift when Trump hinted on Tuesday that existing U.S. tariffs on Chinese imports could be significantly reduced from the current 145%. “It won’t be that high, not going to be that high,” he reassured.
The anticipation on Wall Street had been that Trump might lower tariffs following successful trade negotiations, and he suggested that he would be “very nice” to China’s economy, avoiding any hardline approach with President Xi Jinping.
“There is a chance for a major deal here,” remarked U.S. Treasury Secretary Scott Bessent on Wednesday.
Should tariffs decrease significantly, investors remain hopeful that an economic decline might be circumvented. However, U.S. businesses already feel the effects of the trade war, with a preliminary reading of business activity dropping to a 16-month low. This decline is attributed to tariff threats driving prices up for goods and services, as per the recent survey by S&P Global released Wednesday.
Given the situation’s volatility, many on Wall Street anticipate that sharp market fluctuations will persist. “The market is likely to continue being influenced by Trump’s latest whims concerning tariffs and trade,” stated Tim Waterer, chief market analyst at KCM Trade.
The S&P 500 currently sits at 12.5% below its record from earlier this year, after briefly descending 20% beneath that high. Daily and even hourly swings remain as Trump and his administration maintain their unpredictable stance towards the market. On Wednesday alone, the S&P 500 surged by 3.4% in the morning, only to see those gains more than halved as the day unfolded.
Trump’s recent comments also had a calming effect on the bond market, leading to eased Treasury yields. This development contrasts with earlier in the month when climbing Treasury yields sparked fears that Trump’s policies were driving investors away from the U.S. and tarnishing the bond market’s safe reputation.
The yield on the 10-year Treasury diminished to 4.38% from Tuesday’s 4.41%. Earlier on, it had dipped to 4.26%.
Tech giants spearheaded Wall Street’s upward trajectory. Nvidia saw a 3.9% rise, recovering from considerable losses faced earlier due to U.S. export restrictions of its H20 chips to China, projected to affect the company’s first-quarter revenue by $5.5 billion. Nvidia’s stock powered the S&P 500 significantly.
Other firms within the artificial intelligence technology sector also advanced considerably. Vertiv Holdings soared 8.5% after reporting profits and revenues that surpassed analyst predictions, driven by strong demand from AI data centers.
Super Micro Computer, involved in producing AI servers, rose 7.6%, while Palantir Technologies, offering an AI platform, increased by 7.3%.
Tesla climbed 5.4% following CEO Elon Musk’s announcement that he will focus more on managing the electric vehicle company after a significant drop in profits was reported late Tuesday. Tesla faces challenges amid backlash over Musk’s efforts tied to government cost-cutting initiatives.
In summary, the S&P 500 gained 88.10 points reaching 5,375.86, the Dow Jones Industrial Average lifted by 419.59 points to 39,606.57, and the Nasdaq composite climbed 407.63 points to 16,708.05.
Internationally, stock indices rose 2.1% in France, 2.4% in Hong Kong, and 1.9% in Japan, with Shanghai being the exception where stocks slightly dipped by 0.1%.