After three brutal trading days, Wall Street finally took a breather. Investors jumped at the chance to scoop up cheap stocks and latch onto any hint of a possible trade negotiation.
On Tuesday, the rebound was on. The Dow Jones Industrial Average surged 930 points, or 2.45%, by midday. Meanwhile, the S&P 500 climbed 2.3%, and the Nasdaq Composite rose 2.5%.
But soon stocks went south out of renewed fears of an all out trade war between China and the U.S.
Bargain Hunters Fuel Market Turnaround
The past few sessions were rough. Fears over President Donald Trump’s escalating tariffs hammered the markets. Many feared the tariffs would drag the U.S. and global economies into recession. Yet with prices tumbling, investors saw opportunities.
The S&P 500’s price-to-earnings ratio fell below 17 by Monday’s close. Historically, that’s a buying signal. Investors moved in quickly.
“This is a very normal, technical action following a market shock,” said Keith Lerner of Truist. “The market was extremely oversold. Markets rarely move in straight lines.”
Lerner explained that panic often leads to opportunity. History shows rebounds tend to come right after steep drops.
Fake News Sparks Real Momentum
On Monday, a rumor spread that Trump was considering pausing his new tariffs. The White House quickly denied it. Still, the brief jolt helped show investors how powerful any positive trade news could be.
“Even smoke can cause fire,” said Michael Block of Third Seven Capital. “Now, traders are hungry for the real thing.”
White House Hints at Talks
Investors now hang on every word from Washington. On Tuesday, Kevin Hassett from the National Economic Council said Trump was flooded with negotiation requests. He highlighted talks with Japan and South Korea as top priorities.
Earlier, Trump posted on social media about a “great call” with South Korea’s acting president. The day before, he spoke with Japan’s Prime Minister, who promised to send a trade team to Washington.
Volatility Index Drops
The VIX, Wall Street’s fear gauge, fell 13% Tuesday. Though fear remained high, traders appeared less jittery. CNN’s Fear and Greed Index showed a modest rise in confidence.
“Traders are looking for any signal of movement on tariffs,” said Jamie Cox of Harris Financial. “The market is set for a big rally.”
Europe Opens the Door
Across the pond, the EU showed it was willing to negotiate. Officials said they were ready to boost purchases of American liquefied natural gas. That move came in response to Trump’s complaints about trade deficits.
Meanwhile, U.S. Trade Representative Jamieson Greer told lawmakers that about 50 countries were now in talks. The administration, he said, was pushing hard for fast-track deals.
Midnight Deadlines Loom
Despite Tuesday’s bounce, threats still loomed large. Trump had already imposed 10% tariffs on most imports. By midnight Wednesday, even steeper tariffs were set to hit dozens of countries.
China faced tariffs as high as 70%. Trump warned an extra 50% could be added if Beijing didn’t back down. China’s government responded forcefully, promising to “fight to the end.”
The standoff has all the makings of a high-stakes game of chicken. While both economies could suffer, China’s heavy reliance on U.S. trade makes it especially vulnerable.
A Deal or a Meltdown?
Investors are betting on progress. But the odds of a sweeping deal remain uncertain. If no compromise is reached, both economies could sink—and take global markets with them.
Wall Street giants like Goldman Sachs and JPMorgan Chase have warned that an unchecked trade war could spark a global recession this year. Stocks might fall even further.
Navarro Sees No Problem
Despite the chaos, White House adviser Peter Navarro stayed upbeat. “It’s finding the bottom now,” he said on Fox News. “We’ll see the S&P 500 lead the recovery. Dow 50,000—it’s going to happen.”
Others were less optimistic. JPMorgan CEO Jamie Dimon warned that the tariffs could backfire. They may hurt the economy, raise prices, and damage U.S. credibility abroad.
Global Markets Rally
Still, Tuesday saw gains worldwide. Asia closed higher across the board. Japan’s Nikkei rose 6%. South Korea’s Kospi edged up 0.3%. Australia’s ASX 200 gained 2.3%. Hong Kong’s Hang Seng jumped 1.5% after plunging 13% Monday.
In Europe, markets joined the rally. France’s CAC climbed 2.5%. Germany’s DAX added 2.48%. London’s FTSE 100 rose 2.71%. The pan-European STOXX 600 index ended up 2.72%.
For now, the market seems to have caught its breath. But with tariffs looming and negotiations still in the early stages, investors remain on edge.
