NEW YORK (AP) — U.S. stocks are leaping Wednesday as a worldwide rally comes back around to Wall Street following updates from President Donald Trump about his plans for the Federal Reserve and his trade war that investors found encouraging.
The S&P 500 was 2.7% higher in morning trading, coming off a big gain Tuesday that more than made up for its steep loss on Monday. The Dow Jones Industrial Average was up 877 points, or 2.2%, as of 10:20 a.m. Eastern time, and the Nasdaq composite was 3.5% higher.
Wall Street’s gains followed strong moves higher for stocks across much of Europe and Asia. They also continue a dizzying, up-and-down run for markets as investors struggle with how to react to so much uncertainty about what Trump will do with his economic policies. The S&P 500 remains 11.6% below its record set earlier this year after briefly dropping roughly 20% below.
The market's latest move is up in part because Trump said late Tuesday that he has "no intention" to fire the head of the Federal Reserve. Trump had been angry with Jerome Powell, whom Trump had called "a major loser," because of the Fed's hesitance to cut interest rates.
While cutting rates could give the economy a boost, it could also put upward pressure on inflation. Economists say Trump’s tariffs are likely both to slow the economy and to raise inflation, at least briefly.
Trump’s tough talk frightened investors because the Fed is supposed to act independently, without pressure from politicians, so that it can make decisions that may be painful in the short term but are best for the long term.
Trump may have recognized the market’s fear about a move against Powell. He may also be looking to keep someone around whom Trump could blame later if the economy does fall into a recession, according to Thierry Wizman, a strategist at Macquarie.
“Indeed, if the Fed cuts its policy interest rates aggressively, Trump would have little excuse for a recession apart from the pugnacity of his tariff policies,” Wizman said.
Markets also rose after Trump said late Tuesday that U.S. tariffs on imports coming from China could come down “substantially” from the current 145%. “It won’t be that high, not going to be that high,” Trump said.
The hope along Wall Street has been that Trump may lower his tariffs after negotiating trade deals with other countries, and Trump said Tuesday he would be "very nice" to China and not play hardball with Chinese President Xi Jinping. If Trumps brings his tariffs down by enough and quickly, investors believe a recession could be averted.
U.S. businesses say they're already feeling the effects of the trade war. A preliminary reading of U.S. business activity fell to a 16-month low, as the threat of tariffs helped push up prices charged for goods and services at the sharpest rate for just over a year, according to S&P Global's latest survey released Wednesday.
That’s why one of the few predictions many along Wall Street are willing to make is only that sharp swings for financial markets will continue for a while. The market will “more likely than not continue to be dictated by Trump’s latest whims regarding tariffs and trade,” said Tim Waterer, chief market analyst at KCM Trade.
Trump’s comments also had a big effect on the bond market, where Treasury yields eased. It’s a turnaround from earlier this month, when spiking Treasury yields were raising fears that Trump’s actions were scaring investors away from U.S. investments and weakening the U.S. bond market’s reputation as one of the safest places to keep cash.
The yield on the 10-year Treasury fell to 4.31% from 4.41% late Tuesday. That's a notable move for the bond market, which measures things in hundredths of percentage points.
On Wall Street, Big Tech helped lead a widespread rally where most U.S. stocks climbed.
Nvidia rose 4.5% to claw back more of the sharp losses it took last week after saying U.S. restrictions on exports of its H20 chips to China could hurt its first-quarter results by $5.5 billion.
Other stocks in the artificial-intelligence technology ecosystem also helped lead the way. Vertiv Holdings, which traces its roots to the industry's first manufacturer of computer room air conditioning, jumped 11.3% after reporting stronger profit and revenue for the latest quarter than analysts expected. It said it's continuing to see accelerated demand from AI data centers.
Tesla revved 5.6% higher after CEO Elon Musk said he'll spend less time in Washington and more time running his electric vehicle company. Tesla on late Tuesday reported a big drop in profits, and it has been struggling because of backlash against Musk's efforts to lead cost-cutting efforts by the U.S. government.
In stock markets abroad, indexes jumped 2.8% in France, 2.4% in Hong Kong and 1.9% in Japan. Stocks in Shanghai were an exception, where they dipped 0.1%.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
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