US stocks skyrocket higher after Trump signals shift in trade policy

By John Towfighi, David Goldman and Anna Cooban, CNN

New York (CNN) — US stocks skyrocketed higher Wednesday after President Donald Trump posted on social media that he authorized a 90-day pause on the “reciprocal” tariffs that went into effect at midnight, with the exception of China.

Wall Street had been on edge, looking for any sign that Trump might shift his approach to his punitive tariffs. So when Trump posted that he authorized a pause on most reciprocal tariffs, investors were ready to dive in.

US stocks immediately surged. The Dow skyrocketed 2,963 points, or 7.87%. The S&P 500 shot up 9.52%. The tech-heavy Nasdaq soared 12.16%.

In a massive turnaround, the S&P 500 posted its best day since October 2008. The Nasdaq posted its best day since January 2001 and its second-best day in its history. The Dow posted its best day in five years.

The S&P 500 is now up 12.86% from its nadir reached two days ago, but is still down more than 3.7% from its close on April 2, right before Trump initially put his reciprocal tariffs into effect. The Nasdaq is still 2.7% below its close on April 2.

“The market’s move upward is violent, and speaks to how badly the market was looking for clarity on this issue,” said Chris Brigati, chief investment officer at SWBC, an investment firm in San Antonio, Texas.

The positive shift was widespread. Nearly every single company in the S&P 500 rose, according to data from FactSet.

Following Trump’s announcement, investors scooped up stocks and markets soared. Yet uncertainty remains as Trump still escalated the trade war with China, raising its tariff rates to 125% from 104%. Additionally, universal duties of 10% remain on all US imports alongside the targeted, sectoral tariffs on autos.

The S&P 500 had been on the precipice of bear market territory, coming close to a stunningly rapid drop of 20% from the all-time high it hit just seven weeks ago on February 19.

Wall Street breathed a sigh of relief as markets soared, but investors are not necessarily in the clear.

“Trump illustrated to everyone in the market today how incredibly difficult it is to trade around his tariff regime, because he and only he knows when it ends,” said Jamie Cox, managing partner at Harris Financial Group.

Just after the opening bell Trump posted on his social media platform Truth Social: “BE COOL!” and “This is a great time to buy!!!”

An enormous shift in markets

US stocks initially had a mixed start to the day after China announced significant retaliation and the European Union announced countermeasures against President Donald Trump’s enormous “reciprocal” tariffs that had gone into effect earlier in the day.

China’s new tariffs on US goods are 84%, matching the additional tariff the Trump administration had just placed on the world’s second-biggest economy. China, an extreme outlier, now faces a US tariff of at least 104%, compounding the new tariffs with ones already in place.

Fear has gripped investors across the world as the tariffs threaten to plunge the global and US economies into a recession this year. Businesses and consumers will end up footing those massive tariff bills, and uncertainty has led to a slowdown in hiring and consumer spending.

Japan’s Nikkei index closed 4% down, while Hong Kong’s Hang Seng finished marginally higher. On Monday, the Hang Seng tanked in a 13% rout – the biggest daily decline for the index since the 1997 Asian financial crisis.

South Korea’s benchmark Kospi index headed into bear market territory on Wednesday, a decline of 20% from a recent peak, after the country announced $1.3 billion in emergency support measures for its auto industry as it seeks to mitigate the blow of the Trump administration’s tariffs. The index closed 1.7%, falling about 20% from a peak reached in July 2024.

Markets in Taiwan also fell sharply. But the Shanghai stock market closed more than 1% higher, an outlier in a sea of red Wednesday.

In Europe, the region’s benchmark STOXX 600 index fell 3.5%. France’s CAC index was down 3.34% and Germany’s DAX was 3% lower. London’s FTSE 100 index was 2.92% lower.

Oil recovers, bonds are acting strangely

Meanwhile, US oil reversed course after tumbling earlier in the day. US oil gained 4.65% to $62.35 a barrel. Earlier in the day it had tumbled to $57 a barrel. The global benchmark Brent crude reversed course after it had briefly fallen below $60 a barrel and gained 4.23% to $65.48 a barrel. Both had hit their lowest level since 2021 earlier in the day. Oil prices had plunged as investors feared a potential global recession could sap demand for travel, transportation and shipping — all of which require fuel.

Investors have poured money into some traditional safe-havens, such as gold. Gold spot prices rose 3.8%.

But, curiously, US Treasury yields have risen in recent days as investors have sold off bonds. The benchmark 10-year yield, which fell below 4% earlier in the week, is now around 4.3%. Bonds were volatile on Wednesday, with yields coming down slightly after spiking but above recent sessions. Bonds yields and prices trade in opposite directions.

Typically, in times of crisis, investors pour money into longer-term bonds in hopes that the short-term market problems are solved in the long run. But the bond market, like the stock market, has been shaken by extreme volatility in recent days, and some investors are heading for the exits.

Deutsche Bank analysts on Wednesday said the mass exodus from Treasury bonds may signal weakening demand for US-backed assets — traditionally viewed as the gold standard for safety, because it has the backing of the US government.

But in a trade war, investors may be fearful that America could lose its special standing in the world – an opinion echoed by JPMorgan CEO Jamie Dimon in his shareholder letter earlier this week. And foreign governments negotiating with Trump on trade may threaten to sell off their massive Treasury hoards, hurting America’s ability to borrow money to pay for its significant budget deficit.

“A policy objective of reducing bilateral trade imbalances is functionally equivalent to lowering demand for US assets as well,” said Deutsche Bank analysts said in a note to investors.

The US dollar index, which measure’s the dollar’s strength against six foreign currencies, pared its gains after tumbling on Wednesday. The dollar has broadly weakened this year — a potential warning sign about waning investor confidence in the United States.

Elevated volatility

The CBOE volatility index, also known as the “VIX” and Wall Street’s “fear gauge,” briefly surpassed 50 — a level the index has only closed above twice before this week: During the early stages of the Covid pandemic in March and April 2020 and the 2008-2009 financial crisis that brought on the so-called Great Recession.

The VIX sank 30% after Trump’s announcement of a pause on most reciprocal tariffs.

The VIX is perhaps the best-known measure of market sentiment. It measures expected price fluctuations or volatility in the S&P 500 Index options over the next 30 days. The VIX often surges on days when the broader market sinks — and rallies when stocks rise. But over time, the VIX tends to be lower in bull markets and higher when the bears are in control.

Bearish sentiment is pervasive across the market lately. CNN’s Fear and Greed Index has pointed solidly to “Extreme Fear” in recent days — nearing the lowest point on its scale.

Volatility works in both directions, and Monday and Tuesday are good examples. The market surged and tanked and bounced in every direction during the day as news — and even some fake news Monday — about Trump’s potential plans for tariffs made its way through Wall Street.

“The US and China are now locked into a trade war without either likely to back down at the moment,” Susannah Streeter, head of money and markets at Hargreaves Lansdown told CNN. “What you’re seeing in investors being extremely skittish which is why (there are) big fluctuations.”

In an afternoon press conference Tuesday, White House Press Secretary Karoline Leavitt said China had missed its deadline to peel back a 34% retaliatory tariff imposed on US goods Friday. So, the Trump administration nearly doubled its additional tariff on China Wednesday morning.

That means all Chinese goods coming into the United States will receive a minimum 104% tariff.

This is a developing story and will be updated

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CNN’s James Frater and Christian Edwards contributed reporting