US Stocks Bounce Back as Trade Hopes Reignite Market Optimism

After a turbulent start to the week, Wall Street roared back to life on Tuesday, lifted by fresh optimism surrounding U.S.-China trade negotiations. The rebound followed a sharp selloff on Monday, as investors reacted nervously to renewed political uncertainty. But by Tuesday, the mood had shifted dramatically.

U.S. Treasury Secretary Scott Bessent, speaking at a closed-door event in Washington, suggested that the ongoing trade standoff between the U.S. and China could soon see signs of resolution.

“The tit-for-tat tariff war will de-escalate soon,” Bessent reportedly said. Later in the day, White House spokesperson Karoline Leavitt echoed the positive tone, telling reporters that “the president and the administration are setting the stage for a deal… the ball is moving in the right direction.”

The major indices surged, staying in the green throughout the session. The Dow Jones Industrial Average closed at 39,187.04, jumping 2.7%. The S&P 500 followed suit with a 2.5% gain, ending the day at 5,287.76. Meanwhile, the tech-heavy Nasdaq Composite soared 2.7% to settle at 16,300.42.

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Market strategist Sam Stovall of CFRA Research described the rally as a clear example of how investor sentiment can rapidly shift. “This is another example of how the risk is to the upside,” he said, adding that markets had become “oversold” due to recent bearish sentiment.

However, the rebound wasn’t without clouds. The International Monetary Fund (IMF) downgraded its global growth forecast, citing the disruptive effects of President Trump’s trade policies. And while Tuesday saw a pullback in bond yields—offering some relief—the underlying tensions haven’t disappeared.

Just a day earlier, markets were rattled after President Trump launched fresh attacks on Federal Reserve Chair Jerome Powell. Those comments drove U.S. Treasury bond yields higher and sent major indices down roughly 2.5%.

Stovall warned that the market remains uneasy about the president’s pressure on the Fed, noting that even the threat of firing Powell was enough to drag stocks down sharply. “If he actually did it,” he added, “the damage could be even worse.”

Tuesday’s rally was also supported by a wave of corporate earnings. General Electric’s aerospace division was among the day’s standouts, rising 6.1% after reporting stronger-than-expected profits and implementing cost-saving measures to navigate tariff challenges.

Not all earnings news was positive, though. Defense giant RTX took a hit, sliding 9.8% after disclosing an $850 million financial impact tied to tariffs.

Despite the volatility, Tuesday’s bounce was a reminder of how quickly sentiment can swing in today’s market — particularly when geopolitics and central bank tensions are in the spotlight. Investors will be watching closely in the days ahead to see whether trade progress materializes or if it’s just another temporary high.