Stocks rip higher, Nasdaq has best day since '01 as Trump pauses most reciprocal tariffs
Stocks ripped higher and bond yields jumped Wednesday after the White House pulled back on its trade war.
The S&P 500 added 473.13 points, 9.5%, to close at 5,456.90, while the Dow Jones Industrial Average gained 2,962.86 points, or 7.9%, to 40,608.45. The tech-heavy Nasdaq Composite surged 1,857.06 points or 12.2% to 17,124.97 its biggest one-day gain since 2001.
Shortly after 1 pm ET, President Donald Trump said he was pausing reciprocal tariffs on all countries for 90 days while raising China's levy to 125%.
That followed a pledge from China to raise its tariff on U.S. goods to 84% after hefty new tariffs on its goods took effect starting Wednesday. During the day, the European Commission, which represents the European Union, approved a set of tariffs to start April 15, calling U.S. tariffs "unjustified and damaging, causing economic harm to both sides, as well as the global economy.”
By the market close on Tuesday, the S&P 500 had lost more than $5.83 trillion in market value and was down 19% from its peak, teetering on the edge of a bear market. Wednesday's gains were the biggest one-day moves since the 2020 COVID-19 pandemic turmoil.
What are the financial markets saying about tariffs?
Market observers started the day gloomy. On Wednesday morning, JPMorgan Chase CEO Jamie Dimon said he believed the financial market turmoil would tip the U.S. economy into recession. “I think probably that’s a likely outcome, because markets, I mean, when you see a 2000-point decline [in the Dow Jones Industrial Average], it sort of feeds on itself, doesn’t it,” Dimon said on Fox Business’ “Mornings With Maria” show.
But after the announcement, Goldman Sachs analysts withdrew their own recession forecast, but continued to project anemic economic growth of 0.5%.
The CBOE volatility index, which is known as Wall Street's 'fear gauge,' started the day at levels not seen since the COVID panic, but slid 31% to 36 after Trump's announcement.
"We are now in the realm of VIX levels that demand a policy response if stocks are to stabilize," wrote Nicholas Colas, Co-founder of DataTrek Research, in a Wednesday morning analysis. "We need to see the VIX at 80 (2008, 2020 peaks) or at least 62 (March 2020 bottom for the S&P 500) before thinking of calling a near term low for U.S. large caps," Colas added.
Bitcoin jumped more than 6% in the afternoon.
What is going on in the bond market?
The 10-year U.S. Treasury note was up 14 basis points to 4.40 as a multi-day bond rout continued. Bond yields rise as prices fall, and vice versa. Treasury "trading activity has been massive," said Oxford Economics Lead U.S. Analyst John Canavan, in a note out Wednesday morning.
While many pundits have suggested investors might start to sell U.S. government debt in a retreat from American assets, analysts at Goldman Sachs wrote Wednesday morning that they believe such a trade is not currently in play. The sell-off is more likely due to "a reassessment in fiscal risks in the context of a potential downturn," they wrote, as well as the combination of "growth downside and inflation upside risks."
On Wednesday, St. Louis Fed President Alberto Musalem told Reuters that he was concerned about those same trends.
Musalem, who is a voter on the central bank's policy-setting committee, said he did not expect a recession, but expects U.S. economic growth to slip "materially" below trend and the unemployment rate will rise over the year as firms and households adjust to prices driven higher by new import tariffs.
Minutes from the central bank's March policy meeting showed officials were concerned inflation could remain "persistent." A consumer price inflation reading set for Thursday could offer more clues on the outlook for prices.
Stock winners and losers Wednesday
Pharmaceutical stocks were mixed Wednesday after Trump said Tuesday night that the industry could face fresh tariffs. Shares of Tonix Pharmaceuticals lost 10% in the early afternoon.
Shares of Delta Airlines were up 24% after Trump's announcement. United Airlines jumped 26%.
Beaten-down tech stocks rebounded: Apple Inc. shares closed 15% higher and NVIDIA Corporation shares added nearly 19%. Companies exposed to consumer spending and supply chain concerns also rebounded: Restoration Hardware shares closed nearly 29% higher.