U.S. stocks rose, erasing Monday’s plunge as traders made bold bets that the White House will reach a key trade deal with major economic partners. The dollar edged up from Monday’s low and short-term Treasury yields climbed.
The S&P 500 rose 2.5%, its best one-day gain since April 9, after a series of reports reinforced Wall Street’s expectations that tariff-related hostilities are easing as the U.S. makes progress in fleshing out a deal.
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After the close, traders turned their attention to Tesla Inc.’s earnings report. The company reported adjusted earnings that missed analyst expectations and fell short of its previous forecast for sales growth through 2025.
Tesla shares were little changed in after-hours trading in New York as of 4:41 p.m. Intraday, Tesla shares rose 4.6%, but are still down 41% this year as controversy over Chief Executive Elon Musk’s role in the federal government has led to a global sales slump.
‘A time of extreme uncertainty’
A flurry of tariff-related headlines continued to spur market volatility during Tuesday’s trading day, with fast-moving investors scrambling to follow news reports for clues on how to respond to the crisis. White House press secretary Carolyn Levitt told a news conference that progress was being made on a trade deal and that “cooperation with China is moving in the right direction”. Earlier, Politico reported that the White House was close to reaching a comprehensive trade deal with Japan and India.
Stocks rose further after Bloomberg News reported that U.S. Treasury Secretary Scott Bessant said in a closed-door meeting that the tariff standoff with China was unsustainable and he expected the situation to ease.
Bessant’s comments came as the International Monetary Fund slashed its global growth forecasts for this year and next and warned that the trade war could lead to a worsening global economic outlook.
Treasuries and the dollar remained less volatile on Tuesday, showing more stability after Monday. Investors on Monday worried about the potential impact of Trump’s attempt to replace Fed chairman, who had harshly criticized Jerome Powell for being slow to cut interest rates. The 10-year Treasury yield was little changed on Tuesday, but the two-year Treasury yield rose to 3.82% on weak auction demand.
Similar to yesterday, Tuesday’s sharp stock market moves came against a backdrop of lower-than-usual trading volumes, which can sometimes exacerbate volatility.
“We’re in a period of extreme uncertainty, and people shouldn’t react too much to day-to-day volatility,” Anwiti Bahuguna, chief information officer of global asset allocation at Northern Trust Asset Management, said on Bloomberg TV on Tuesday.
ClearBridge Investments’ Jeff Schulze expects the S&P 500 to fluctuate between lows from a few weeks ago to around 5,400 in the short term.
“I think the biggest driver for anything beyond that is whether or not the U.S. is in a recession,” Schultz said at an event Tuesday. “However, in the long term, I think it’s a great opportunity to dollar-cost average into the weakness we’re seeing right now. A lot of negativity has been priced in in a short period of time.”
Gold prices fell after breaking through an all-time high of $3,500. Bitcoin rose more than 4%.
Here are the individual stock moves on Tuesday:
All seven Bloomberg index components rose on Tuesday
3M Co. rose 8.1% after maintaining its full-year financial outlook while acknowledging new risks from the trade war.
Northrop Grumman Corp. reported first-quarter profit that missed analysts’ expectations and cut its full-year earnings forecast — shares fell 13%
Shares of aerospace and defense giant RTX Corp. fell 9.8% after the company said tariffs posed a significant risk to operating profit
Verizon Communications Inc. reported a bigger-than-expected drop in mobile phone subscribers in the first quarter. The company’s shares still closed up 0.6%.
Central bank speakers
Traders also heard from several central bank speakers on Tuesday. European Central Bank President Christine Lagarde told CNBC that the bank has almost achieved its goal of inflation returning to 2%, but flexibility must be maintained as the economic environment becomes more volatile.
Earlier, Federal Reserve Vice Chairman Philip Jefferson said the central bank’s goals of stable prices and maximum employment help promote economic liquidity. Philadelphia Fed President Patrick Harker argued in an article published on Tuesday that using the federal poverty line to measure economic stability may not accurately reflect the plight of low-income families.
Meanwhile, Minneapolis Federal Bank President Neel Kashkari said it is the central bank’s job to ensure that tariffs do not stimulate persistent inflation problems, echoing Powell’s recent comments.
Trade war
While stocks rebounded on Tuesday, concerns that Trump may be ready to fire Powell added to the unease among traders who are already grappling with the turmoil caused by the president’s tariff shock.
Trump’s policies and his swipes at the Fed have forced a reassessment of the dollar and U.S. Treasuries as a safe haven in times of crisis. The International Monetary Fund said the latest escalation in the trade war could cause losses for China and the United States, and the situation will only get worse after this year. However, some traders are waiting to see how negotiations with allies progress.
“We are looking forward to more successful trade negotiations with major trade allies. I think Europe, India, Japan, South Korea and Australia all fall into that category. I think we will see good progress in these countries, which is good for the market.”
The United States said it made “significant progress” on a bilateral trade deal after Vice President J.D. Vance met with Indian Prime Minister Narendra Modi. Vance called on India on Tuesday to buy more U.S. goods, especially energy and military equipment. Trump has repeatedly criticized India for imposing high tariffs.
Some of the main moves in the market:
Stocks
The S&P 500 rose 2.5% as of 4 p.m. in New York
The Nasdaq 100 rose 2.6%
The Dow Jones Industrial Average rose 2.7%
The MSCI World Index rose 1.7%
Currencies
The Bloomberg Dollar Spot Index rose 0.5%
The euro fell 0.8% to $1.1421
The pound fell 0.4% to $1.3332
The yen fell 0.5% to 141.63 against the dollar
Cryptocurrencies
Bitcoin rose 4.8% to $91,530.35
Ether rose 7.8% to $1,700.97
Bonds
The 10-year Treasury yield fell 2 basis points to 4.39%
German 10-year bond yields fell 3 basis points to 2.44%
UK 10-year bond yields fell two basis points to 4.54%
Commodities
West Texas Intermediate crude oil prices rose 1.9% to $64.31 a barrel
Spot gold fell 1.4% to $3,375.54 an ounce
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