A Sign of Easing Trade Tensions Sends U.S. Stocks Higher

Global markets experienced a wave of relief, lifting both stocks and bonds, after the Trump administration moved to ease concerns that had previously unsettled investors. Wall Street appeared poised to extend recent gains, with futures tied to the S&P 500 climbing 2.3%. The rally followed comments from President Donald Trump that eased fears he was planning to dismiss Federal Reserve Chair Jerome Powell. Hopes of a potential de-escalation in U.S.-China trade tensions also contributed to the renewed optimism among traders.

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Tesla shares surged roughly 7% in premarket trading after CEO Elon Musk announced he would scale back his involvement with government-related projects and focus more closely on Tesla’s core business. European markets joined the rally as the Stoxx 600 rose 1.4%, reflecting broader investor confidence.

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Meanwhile, U.S. Treasuries rallied with benchmark 10-year yields falling by 11 basis points to 4.29%, as concerns about Powell’s job security faded. The dollar, which had recently bounced back from a 16-month low, remained steady. Bitcoin rallied past $90,000, the highest level since early March, while gold prices declined as appetite for traditional safe-haven assets waned.

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Trump's latest remarks marked a significant softening from his tone just a week earlier, when he had strongly criticized Powell and suggested that the Federal Reserve wasn’t cutting interest rates fast enough. At that time, the president’s posts on social media implied that Powell’s “termination cannot come fast enough,” fueling speculation about the Fed's independence and causing the dollar to drop to levels not seen since December 2023.

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However, on Tuesday, Trump made it clear he had no current plans to fire the Fed chair, a statement that helped restore investor confidence in the central bank’s stability.

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Trump also addressed trade policy, saying the U.S. is looking to ease tensions with China and that a potential agreement could result in lower tariffs. Treasury Secretary Scott Bessent echoed this view, noting that the administration believes a path forward exists to de-escalate the current standoff. Trump emphasized that any final tariffs on Chinese goods would not approach the extreme levels—up to 145%—that had previously been suggested.

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Francois Rimeu, a strategist at La Francaise AM in Paris, said, “I never believed Powell was truly at risk of being fired, but the reduced tension around China is definitely a relief for the markets.” However, Rimeu also cautioned that uncertainty around the long-term outcome of trade negotiations remains high, urging investors to be prepared for tariffs that may ultimately be tolerable for the global economy—but not entirely removed.

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It was also a busy day for corporate earnings, with several major firms reporting better-than-expected results. Boeing shares gained in premarket trading after the aerospace giant reported first-quarter sales that beat estimates.

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AT&T shares also rose on a strong quarterly report, while Philip Morris International rallied after issuing an earnings forecast that exceeded expectations. Germany-based SAP SE saw its stock soar to its highest gain in six years, as the software company’s profits surpassed analyst projections.

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Despite the day’s positive tone, some investors remain skeptical of Trump’s change in approach. Gilles Guibout, head of European equities at AXA Investment Managers, noted that “while one could view Trump’s recent remarks as a sign he’s stepping back on both trade and Powell, his track record suggests he thrives on unpredictability.” Guibout added that this unpredictability has eroded investor trust, especially on the international stage, and it’s evident in the dollar’s recent performance.

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Looking ahead, investors are expected to closely monitor both the administration’s trade policy developments and further commentary on Federal Reserve leadership. Though Trump has toned down his rhetoric for now, market participants remain wary of potential reversals or renewed tensions.

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In summary, the markets bounced back sharply thanks to a combination of political reassurances and corporate strength. Trump’s softer stance on the Fed and China offered temporary relief, but caution remains as investors await more concrete developments in both monetary policy and international trade.

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