US stocks trend up for third day on hope for June Fed rate cut. Dow adds 486 points.

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U.S. stocks closed higher for the third consecutive day as investors bet a Federal Reserve rate cut could come in June to head off a recession due to tariffs.

Fed Governor Christopher Waller said in a Bloomberg interview he’d support rate cuts in the event aggressive tariff levels hurt the labor market. Fed Bank of Cleveland President Beth Hammack told CNBC the central bank could move on rates as early as June if it has clear evidence of the economy’s direction.

The CME FedWatch tool pegs odds for a quarter-percentage point cut at the Fed's policy meeting in June at 61.3%.

The blue-chip Dow closed up 1.23%, or 486.83 points, to 40,093.40; the broad S&P 500 added 2.03%, or 108.91 points, to 5,484.77; and tech-laden Nasdaq rose 2.74%, or 457.99 points, to 17,166.04. The benchmark 10-year Treasury yield dipped to 4.309%.

Last week, Chair Jerome Powell roiled markets when he reiterated that the central bank isn't in a hurry to lower rates. He said the Fed had time to wait and see how tariffs affect the economy, which triggered criticism from President Donald Trump.

Trump criticized Powell for always being too slow to lower rates. He said the Fed should lower rates now to prevent an economic slowdown.

Hopes for a rate cut overshadowed China's denial that it's held trade talks with the U.S.

"Any claims about the progress of China-U.S. economic and trade negotiations are groundless and have no factual basis," He Yadong, a commerce ministry spokesman, said. There were no ongoing talks with the U.S. over trade matters and the U.S. "should cancel all the unilateral measures on China," He said.

Foreign ministry spokesperson Guo Jiakun said reports of U.S.-China talks were "fake news."

Aside from China's denial, the fact that the Trump administration has moved on to tariff deals is a good sign, said Adam Turnquist, chief technical strategist at LPL Financial.

"The narrative transition from tariff rates to tariff deals is an important step in the recovery of the equity market," he said. "This change suggests we have likely moved beyond peak policy uncertainty and fear, an important piece of the market low puzzle."

If the Fed lowers rates, stocks could recover quickly. "History reveals most bottoms are a process that often involves a retest of the initial lows. V-shaped recoveries are rare and are typically accompanied by a pivot from the Fed," he said.

China's harsh comments contradict a recently softer tone from the Trump administration over trade with China. Treasury Secretary Scott Bessent said Wednesday the U.S. has the “opportunity for a big deal” on trade, and President Donald Trump hinted earlier at a softer stance on China tariffs. Reports said Trump was considering slashing tariffs on Chinese imports in a bid to de-escalate tensions.

The Financial Times reported the White House is planning automaker exemptions for “car parts from the tariffs that Trump is imposing on imports from China to counter fentanyl production, as well as from those levied on steel and aluminum.” 

Bessent said Thursday an "agreement of understanding" on trade with South Korea could come next week.

Corporate news

After the market closed, Google parent, Alphabet, said its quarterly results topped analysts' forecasts. In early after-hours trade, shares of the search giant were up almost 4.5%.

Big movers during the regular day session included:

• Procter & Gamble's quarterly earnings topped analysts' forecasts but sales missed. The maker of Tide laundry detergent also cut its full-year outlook, and its shares shed nearly 4%.
• Chipotle's sales in the first three months of the year fell below analysts' forecasts. The burrito chain also said same-store sales declined for the first time since 2020 and lowered the top end of its outlook for full-year same-store sales growth. Shares added 1.64%.
• Texas Instruments beat analysts' forecasts with its first-quarter results, and shares jumped 6.56%.
• Southwest Airlines said it will cut capacity in the second half of 2025, given further signs of weaker domestic bookings this year. The carrier also pulled its full-year guidance. Its shares rose 3.68%.
• Alaska Airlines warned of a six-percentage-point hit to revenue in the second quarter and pulled its full-year outlook due to economic uncertainty. The stock slumped more than 10%.
• American Airlines withdrew its annual outlook amid the uncertain economic outlook and warned second-quarter revenues would miss analysts' forecasts. The airline's shares added 3%.
• International Business Machines shares dropped more than 6% after the company said 15 of its government contracts were shelved under a cost-cutting drive by the Trump administration.
•  Intuitive Surgical said its quarterly results rose but warned that tariffs could hurt its gross margin going forward. Its stock rose more than 4%.
• Boeing topped analysts' estimates in the first three months of the year. The plane maker said China has stopped taking its aircraft amid the trade war and it was ready to send them elsewhere. Its stock gained more than 2%.
• Phillip Morris raised guidance and said the popularity of its Zyn nicotine pouches boosted quarterly earnings. Shares rose more than 1%.
• ServiceNow earnings in the first three months of the year beat analysts' forecasts. Shares of the software company gained 15.34%.
• Comcast reported a larger-than-expected decline in broadband customers in the first quarter. Shares of the cable company fell almost 4%.
• PepsiCo lowered its full-year forecast due to tariff costs and weaker consumer spending. Shares eased nearly 5%
• Merck lowered its full-year earnings outlook partly to account for recently imposed tariffs. The drugmaker's stock ended up more than 1%.
• Hasbro said results in the first three months of the year topped analyst expectations. The toymaker also maintained its outlook despite recent escalations in the global tariff war. Shares rallied more than 14.5%

Economic data shrugged off

Investors mostly shrugged off this morning's economic data, which included the slowest existing home sales since 2009. March sales fell 5.9% from February,  according to the National Association of Realtors. 

Meanwhile, weekly jobless claims rose to 220,000, matching economists' consensus forecast and indicating that souring views on the economic outlook haven't translated into a weaker labor market yet.

"Management teams seem to be taking a “cautious but hopeful” approach to the current situation," said Bret Kenwell, U.S. investment analyst at tarding platform eToro. "While they may not be readily green-lighting large projects or hiring sprees, they are not yet undergoing mass layoffs either. For now, it’s constructive to see the labor market continuing to hold up despite the volatility and worries that persist due to the volatility in various markets."

March durable goods orders soared 9.2% from February and topped economists' forecast for being up 1.6% as companies pulled forward orders to escape tariffs.

Cryptocurrency

Bitcoin eased, consolidating recent gains above $90,000.

The digital currency was last down 0.09% at $93,553.71.

Cantor Fitzgerald is launching a crypto venture with Tether and Japanese technology investor SoftBank Group to buy bitcoin - a bet that interest in the digital currency will expand while Trump's in office.

The combined vehicle is valued at $3.6 billion, based on a bitcoin price of nearly $85,000 and Twenty One launching with more than 42,000 bitcoins, which will make it the world's third-largest bitcoin treasury, Twenty One said.

The story was updated with new information.

Medora Lee is a money, markets, and personal finance reporter at Paste BN. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.