Stocks Rebound as Traders Bet on Tariff Progress: Markets Wrap

(Bloomberg) — US stocks jumped, nearly wiping out Monday’s plunge, as traders unleashed risky bets that the White House will clinch crucial trade deals with top economic partners. The dollar recovered slightly from Monday’s lows while short-term Treasury yields climbed.

The S&P 500 rose 2.1% after a series of reports nurtured Wall Street expectations that tariff-related hostilities are easing as the US makes progress in fleshing out agreements.

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A volley of tariff-related headlines continue to fuel outsized market moves as fast-twitch investors pour over news reports for clues on how to trade the crisis. White House Press Secretary Karoline Leavitt, in a news briefing, said that progress is being made on trade deals and that the “ball is moving in the right direction with China.” It follows a Politico report that the White House is nearing general agreements with Japan and India on trade. 

Earlier, stocks had pushed even higher following Bloomberg News’ report of closed-door comments by Treasury Secretary Scott Bessent saying the tariff standoff with China is unsustainable and that he expects the situation to de-escalate.

Treasuries and the dollar still posted smaller moves on Tuesday, showing greater stability after Monday, when investors were worried about the implications of any effort to replace the Federal Reserve Chair by President Donald Trump, who has berated Powell for being slow to cut interest rates. While the 10-year Treasury yield barely budged on Tuesday, two-year yields briefly rose to 3.82% after lackluster demand for an auction.

Similar to yesterday, Tuesday’s big moves in stocks came amid lighter-than-usual trading, a backdrop that sometimes exacerbates swings. Volume in Nasdaq 100 shares was about 13% below the recent average, data compiled by Bloomberg show, while Monday’s post-Easter level was around 20% off the historical pace.

“We are in a period of extreme uncertainty, where one should not react too much to daily moves,” Anwiti Bahuguna, Northern Trust Asset Management’s CIO of global asset allocation, said on Bloomberg Television on Tuesday.

Near term, Jeff Schulze of ClearBridge Investments expects the S&P 500 to move between lows seen a couple of weeks ago to around the 5,400 level. 

“I think the biggest driver of being outside of that range is whether or not the US does indeed have a recession,” Schulze said at an event on Tuesday. “However, longer term, I think this is a great opportunity to be dollar-cost-averaging into the weakness that we’ve seen. A lot of negativity has been priced in a short period of time for US equities.”

Gold pared gains after rising to a record high past $3,500. Bitcoin advanced more than 4%.

Among individual stock movers:

• All members of the Bloomberg Magnificent Seven Index are trading higher on Tuesday
• 3M Co. rose as much as 8.9% after it stood by its full-year financial guidance while acknowledging new risks from the trade war
• Northrop Grumman Corp. reported first-quarter profit that missed analysts’ expectations and cut its earnings forecast for the year — shares are down 13%
• Shares of RTX Corp., an aerospace and defence giant, fell 10% after the company said tariffs pose a significant risk to operating profit
• Verizon Communications Inc. reported a larger-than-expected decline in mobile-phone subscribers in the first quarter. Shares are flat.

Central-Bank Speakers

Traders also heard from several central-bank speakers on Tuesday. European Central Bank’s President Christine Lagarde told CNBC that the bank has almost achieved its goal of returning inflation to 2% but must be flexible as the economic backdrop becomes more volatile.

Earlier, Fed vice chair Philip Jefferson said the central bank’s goals of stable prices and maximum employment can help foster economic mobility. And Philadelphia Fed President Patrick Harker wrote in an essay released Tuesday that measuring economic stability with the federal poverty line can fail to provide an accurate picture of the struggles among lower-income households.

Meanwhile, Fed Bank of Minneapolis President Neel Kashkari said it’s the central bank’s job to make sure tariffs don’t spur an ongoing inflation problem, echoing recent comments by Powell.

Tariffs

Even though stocks seem to be bouncing back on Tuesday, concerns that Trump may be preparing to fire Powell have added to unease for traders already grappling with the turmoil unleashed by the president’s tariff onslaught. 

Trump’s policies and his broadsides against the Fed have forced a reappraisal of the dollar and Treasuries as havens in times of stress. The IMF said the latest escalation in the trade war risks saddling China and the US with losses — and that it could only get worse after this year. Yet, some traders are waiting to see how negotiations play out with allies. 

“We are looking at more successful trade negotiations with key trading allies. I put Europe, India, Japan, South Korea, Australia in that category,” Stuart Kaiser, head of equity trading strategy at Citigroup Inc., said on Bloomberg Television on Tuesday. “I think we will see good progress there and that is good for markets.”

Attention later Tuesday will shift to Tesla, which reports first-quarter earnings after market close. The stock is up 4% Tuesday but remains about 40% lower year-to-date as controversy over Chief Executive Officer Elon Musk’s role in the federal government has contributed to a global sales slump.

Meanwhile, the US said it’s made “significant progress” toward a bilateral trade deal following talks between Vice President JD Vance and Indian Prime Minister Narendra Modi. Vance on Tuesday called on India to buy more American goods, particularly energy and military equipment. Trump has repeatedly criticized the country for high tariffs. 

Some of the main moves in markets:

Stocks

• The S&P 500 rose 2.1% as of 3:20 p.m. New York time
• The Nasdaq 100 rose 2.1%
• The Dow Jones Industrial Average rose 2.3%
• The MSCI World Index rose 1.5%

Currencies

• The Bloomberg Dollar Spot Index rose 0.4%
• The euro fell 0.8% to $1.1423
• The British pound fell 0.3% to $1.3336
• The Japanese yen fell 0.5% to 141.56 per dollar

Cryptocurrencies

• Bitcoin rose 4.9% to $91,637.53
• Ether rose 7.9% to $1,701.41

Bonds

• The yield on 10-year Treasuries declined two basis points to 4.39%
• Germany’s 10-year yield declined three basis points to 2.44%
• Britain’s 10-year yield declined two basis points to 4.54%

Commodities

• West Texas Intermediate crude rose 1.9% to $64.31 a barrel
• Spot gold fell 1.3% to $3,381.04 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Lynn Thomasson, John Viljoen, Julien Ponthus, Vildana Hajric and Isabelle Lee.

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