Did President Donald Trump blink on trade? The market thinks so.
Stocks and long-dated U.S. Treasuries continued to rally on Wednesday after Trump seemed to ease his rhetoric against both China and Federal Reserve Chair Jerome Powell.
The Dow Jones Industrial Average surged 1,030 points, or 2.6%. The S&P 500 rose 3.2%. The Nasdaq Composite surged 4.1%.
The yield on the 10-year Treasury note was down to 4.3%. The 30-year yield was down to 4.75%.
The moves follow comments from the president that tariffs on goods imported from China will come down “substantially” when a deal is negotiated.
“We’re going to be very nice,” Trump said. “Ultimately they have to make a deal.”
Shortly after the market opened, The Wall Street Journal reported the White House is considering slashing some tariffs on China in some cases by more than half, citing people familiar with the matter. The report said Trump hadn’t made a final decision.
Stocks rebounded on Tuesday following headlines that Treasury Secretary Scott Bessent told attendees at an event hosted by JPMorgan that he expects China and the U.S. to de-escalate their trade hostilities in the “very near future.”
Trump also said Tuesday he had no intention of firing Powell despite comments on social media attacking the central bank chairman for not lowering interest rates.
Rosenberg Research’s David Rosenberg writes that the president is “blinking” on both trade and his apparent threats against Powell, which has led to some follow-through of yesterday’s move.
“I can understand the reaction by the markets which are on pins and needles and on constant alert for the next comment, press conference or social media snippet out of the White House,” Rosenberg writes. “But all that the President has done is to make volatility great again.”
Markets were back in risk-on mode, according to Andrew Brenner, head of international fixed income at NatAlliance Securities, as the latest comments were a sign of the so-called “Trump put.” The Trump put is the idea that if markets react negatively enough to a Trump policy, the president will walk it back to send stocks rebounding.
“But the waffling of the administration continues,” Brenner writes. “It seems like Trump wants maximum headlines.”