U.S. stocks opened higher Wednesday after President Donald Trump signaled a softer stance toward the eye-watering tariffs he had set for China, while also stating he would not make an immediate change in leadership at the Federal Reserve.
Investors were also cheered by Elon Musk’s imminent return to a more full-time focus on Tesla, dialing back his controversial stint as a Trump White House adviser to one to two days a week.
The S&P 500 climbed 2.5% in early-morning trading. The tech-focused Nasdaq surged 3.5%. Dow Jones Industrial Average gained 750 points or about 1.9%.
Investors also increased demand in U.S. government bonds, lowering borrowing costs — an explicit goal of the Trump administration.
Trump told reporters Tuesday evening that the China tariffs, which on paper have reached as high as 145%, would “come down substantially” as he looked to secure a trade deal.
Those remarks came after Treasury Secretary Scott Bessent told a group of investors earlier in the day that the administration was looking toward “de-escalation” with China. “No one thinks the current status quo is sustainable,” he said according to CNBC, which cited a person present at the investor gathering hosted by JP Morgan.
Trump also said Tuesday he had “no intention” of firing Federal Reserve Chair Jerome Powell, despite calling him a “major loser” and “Mr. Too Late” the day before — a reference to what Trump perceives as dawdling in lowering interest rates.
Economists had warned that any threat to the central bank’s independence would upend global markets and cause U.S. borrowing rates to surge.
With Wednesday’s gains, stocks will have climbed about 8% over the past week and a half.
Yet they remain about 13% off of the highs seen in January, just after Trump’s inauguration. Markets remain bruised — perhaps indefinitely so — by Trump’s erratic policymaking.
Trump changes-of-mind have been a constant of his second term, and there was nothing to suggest that the latest evolution of his thinking would be final.
“With investor concerns growing, U.S. President Trump demonstrated the art of the retreat,” Paul Donovan, chief economist of UBS Global Wealth Management, said in a note to clients.
He continued: “Nonetheless, the erratic threaten-retreat-threaten-retreat cycle has economic consequences. The uncertainty this causes may impact consumer and business decision-making.”
Some commentators believe a more lasting shift by foreign investors away from holding U.S. assets has already begun.
“The U.S. faces a coming adjustment to a lower pace of foreign capital inflows to US asset markets,” Bob Elliott, co-founder, CEO and chief investment officer at the Unlimited Funds asset management group, said in a post on X Wednesday.
Meanwhile, tech stocks were poised to get a significant boost from comments by Musk, the CEO of the electric carmaker Tesla, during the company’s first-quarter earnings report to investors Tuesday afternoon.
While the company said profits had shrunk dramatically in the first-three months of the year, Musk said he was actively winding down his role advising the Department of Government Efficiency, the quasi-official Trump project that has upended the federal workforce.
Before the market open at 9:30 a.m., Tesla shares were up as much as 7%.
“Musk made a huge move forward as his time in DOGE/White House now winds down and he will be laser focused on Tesla again,” Dan Ives, managing director at Wedbush Securities, said on X Wednesday. “Musk finally read the room and made a pivot which helps remove the black cloud over Tesla. New chapter begins.”
Ives said his new long-term price target for Tesla’s stock was $350; as of Tuesday, the stock had closed at about $238, implying a 47% gain.
Others remained cautious that Tesla could recover in a short amount of time from the 50% drop its share price has seen over the past several months. On the earnings call with investors, Musk said the company was still on track to roll out commercially viable robotaxis, humanoid robots and full-self-driving capabilities.
“We remind investors that TSLA has historically delivered stunning technical achievements, but often delivered later than initially promised,” analysts with the Truist financial group said in a note to clients. “We maintain an open mind.”
