Wall Street's main indexes rallied to one-week highs on Wednesday on hopes for a de-escalation in the U.S.-China trade war and as President Donald Trump scaled back his threats to fire Federal Reserve Chair Jerome Powell.
The prospect of negotiations between Washington and Beijing, currently locked in an escalating tit-for-tat tariff war, helped lift sentiment after a Wall Street Journal report cited a senior White House official as saying that U.S. tariffs on China were likely to come down to between roughly 50% and 60%.
Stocks extended gains after the report, building on early momentum after Trump said on Tuesday he had "no intention" of firing Powell, walking back on his comment that the Fed chair's termination could not come "fast enough" that had drawn heavy criticism.
Markets welcomed the change in the president's tone. Trump's criticism of the Fed chair had fueled concerns about the central bank's autonomy, leading to sharp losses in U.S. assets, including stocks and the dollar, earlier in the week.
Trump's comments on tariffs and backtracking on Powell "set the stage" for the day's equity rally, said Leslie Thompson, CIO at Spectrum Wealth Management.
"We're going in between upside and downside exhaustion in the market, but certainly it's trading on headlines."
Corporate earnings were also in focus, with Tesla (TSLA.O) jumping 3%. The EV-maker reported a profit for its core auto business that topped rock-bottom expectations. CEO Elon Musk said he would step back from his involvement in the Trump administration to focus on running his numerous companies.
At 09:48 a.m. ET, the Dow Jones Industrial Average (.DJI) rose 1,047.16 points, or 2.66%, to 40,227.42, the S&P 500 (.SPX) gained 169.43 points, or 3.20%, to 5,457.19, and the Nasdaq Composite (.IXIC) gained 667.51 points, or 4.10%, to 16,967.93.
Megacap tech stocks rose broadly, with Nvidia (NVDA.O) gaining 5.1%. Apple (AAPL.O) and Meta Platforms (META.O) rose 3.6% and 6.7%, respectively, despite being fined for breaching European Union law.
Consumer discretionary (.SPLRCD) and information technology stocks (.SPLRCT) led broader gains, rising more than 4% each, helping the tech-heavy Nasdaq largely outperform peers.
The Philadelphia SE Semiconductor index (.SOX) jumped about 6%, while the small-cap Russell 2000 (.RUT) was up 4.1%.
The CBOE Volatility Index (.VIX), Wall Street's fear gauge, was down 2.79 points at 27.79, its lowest since April 3.
Trump's criticism of Powell had hit markets already battered by his erratic trade policies, with the S&P 500 (.SPX) more than 11% lower than its February record high. Federal Reserve policymakers have reiterated caution in easing policy, given the lack of clarity on the impact of the president's trade policies.
Thompson also said the current rally seemed sustainable as indexes came off heavy declines.
Boeing (BA.N) gained 5.3% after reporting a smaller-than-expected quarterly loss. It was the biggest gainer on the blue-chip Dow.
Data showed U.S. business activity slowed to a 16-month low in April and prices charged for goods and services soared amid tariff uncertainty.
Advancing issues outnumbered decliners by a 10.02-to-1 ratio on the NYSE, and by a 6.71-to-1 ratio on the Nasdaq.
The S&P 500 posted one new 52-week high and two new lows, while the Nasdaq Composite recorded 25 new highs and 12 new lows.
