After beginning the week with a significant decline, stocks regained most of their losses on Tuesday as the S&P 500 increased by 2.5%. This recovery was led by gains in major tech companies such as Apple, Amazon, and Meta.
The market rally was partly spurred by comments from Treasury Secretary Scott Bessent, delivered at a closed-door investor summit organized by JP Morgan in Washington, D.C. According to Bloomberg, Bessent indicated that he anticipated a de-escalation in the tariff situation with China, describing the ongoing standoff as unsustainable.
Investors, eager for positive developments following weeks of volatility, responded swiftly to the Bloomberg report, published at midday, leading to a jump in stock prices after a morning of gradual increases.
The usual investor behavior of moving away from risky assets towards the U.S. dollar during economic uncertainty has shifted amid President Trump’s tariff war. Concerns about shifting U.S. government policies weakened the dollar against other currencies. However, the dollar stabilized on Tuesday as the market rebounded. In Bank of America’s latest Global Fund Manager Survey, 61% expected the dollar to decrease in value over the next year.
Despite this, alternative investments continued their upward trend. Bitcoin surged past $90,000 on Tuesday for the first time in over a month, with analysts suggesting it has decoupled from traditional equity markets. Gold, traditionally seen as a safe haven during volatility, briefly surpassed $3,500 an ounce on the same day.
Despite the brief respite in the downturn on Tuesday, bearish indicators still loom over the markets, including President Trump’s threats to dismiss Federal Reserve Chair Jerome Powell. A report by Bank of America Securities on Monday downgraded its global economic growth forecast by 0.3%, citing concerns over Trump’s unpredictable tariff policies. The analysts predicted significant economic slowdown, estimating a 35% chance of recession.
The White House continues to promote narratives of nearing trade agreements with countries like Japan and India, though the situation may be more complex. On Tuesday, Politico reported that instead of comprehensive trade deals, any agreements will likely be preliminary memorandums of understanding, with detailed negotiations ongoing for months.
With the earnings season underway, market volatility is expected to persist. Tesla, led by Elon Musk, reported its first-quarter results on Tuesday evening, following a nearly 15% drop in its stock price over the past month. The company disclosed a 71% decline in net income for the first quarter, attributed to competitive pressures from abroad and uncertainty regarding Musk’s role.
