Stocks Notch Back-to-Back Gains as Dollar Climbs: Markets Wrap

(Bloomberg) — Signs Donald Trump is rethinking the most-aggressive elements of his combative stances on trade and the Federal Reserve spurred back-to-back gains in stocks and the dollar, while soothing volatility across asset classes.

The S&P 500 rose 1.7%, though it pared an earlier surge that had swelled to as much 3.4%, as investors tried to gauge how seriously to take pronouncements of flexibility in negotiations with China and other trading partners. The greenback climbed against most major currencies.

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After a report the US would be willing to phase in lighter tariffs on Beijing over five years, Trump told reporters that China was “going to do fine” once talks had settled. Meantime, Treasury Secretary Scott Bessent said the president hasn’t offered to take down levies on the Asian nation on a unilateral basis.

Long-maturity Treasury yields fell as Trump allayed fears he would fire Fed Chair Jerome Powell. The yen slid as Bessent said America won’t be pursuing specific exchange-rate targets in its talks with Japan. Bitcoin jumped while haven trades like gold pushed lower.

“It’s just the perception of how strong the tensions are or not,” said Brent Schutte at Northwestern Mutual Wealth Management. “I suspect that you’re going to see more of this in the coming months as we see a ratcheting up and a pulling back up of trade tensions until we get some sort of an idea of what the future actually looks like.”

As the earnings season rolled in, Boeing Co.’s results beat estimates. Tesla Inc. rallied as Elon Musk vowed to pull back “significantly” from his work with the government. 

In late hours, International Business Machines Corp. dropped as its results weren’t strong enough to quell concerns that tariffs and federal cost cuts will dent its business. Southwest Airlines Co. withdrew its financial guidance amid economic uncertainty. Texas Instruments Inc. gave a bullish forecast.

Bessent said that the Trump administration is looking at multiple factors with regard to China beyond just tariffs. He also noted that the strongest relationship between Washington and Beijing is at the top, and that there was no timeframe for engagement. He said that a full rebalancing of trade might take two to three years.

Trump said separately that the US is going to have a fair deal with China.

Trade Worries Dominate Fed’s Beige Book, Activity Little Changed

“Given our view that policy is driving the proverbial bus, we haven’t spent too much time in trying to forecast the outlook for earnings or the economy all that much,” said Michael Kantrowitz at Piper Sandler & Co. “As the policy backdrop becomes clearer, and is driving markets less, estimates about the economic and earnings road ahead will become important once again.”

Kantrowitz continues to recommend a balanced portfolio of companies with more stable fundamentals during the period of uncertainty. 

“While we don’t think we’re out of the woods, we must respect history and how market corrections begin to find their footing as the primary problem begins to ‘heal’,” he noted.

Despite the advance on Tuesday and Wednesday, the S&P 500 is still down since April 2, when Trump announced his tariff plans. Stocks have swung wildly over that stretch.

Retail investors have been aggressive buyers of US equities this year even as professional money managers ran for cover. Since April 2 alone, the group has pumped over $30 billion into American stocks and ETFs, according to JPMorgan Chase & Co.’s Emma Wu.

Meantime, the amount of money clearing houses demand to cover equity futures positions has spiked this month amid wild market swings, adding one more headache for Wall Street money managers.

CME Group Inc.’s CME Clearing raised the initial margin requirement for E-mini S&P 500 futures by nearly 30% during April, including a 12% jump in a single day, the most since the post-Covid era, according to data seen by Bloomberg.

Some of the main moves in markets:

Stocks

• The S&P 500 rose 1.7% as of 4 p.m. New York time
• The Nasdaq 100 rose 2.3%
• The Dow Jones Industrial Average rose 1.1%
• The MSCI World Index rose 1.3%

Currencies

• The Bloomberg Dollar Spot Index rose 0.6%
• The euro fell 0.8% to $1.1325
• The British pound fell 0.5% to $1.3264
• The Japanese yen fell 1.3% to 143.43 per dollar

Cryptocurrencies

• Bitcoin rose 2.6% to $93,547.06
• Ether rose 5.3% to $1,786.66

Bonds

• The yield on 10-year Treasuries declined two basis points to 4.38%
• Germany’s 10-year yield advanced five basis points to 2.50%
• Britain’s 10-year yield was little changed at 4.55%

Commodities

• West Texas Intermediate crude fell 2.1% to $62.31 a barrel
• Spot gold fell 2.6% to $3,292.99 an ounce

–With assistance from Rheaa Rao, John Viljoen, Robert Brand, Julien Ponthus and Anand Krishnamoorthy.

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