US stocks rebound after Trump backs off threat to fire Fed chairman

Traders on the floor of the New York Stock Exchange on March 5, 2025. (Source: CNBC/AFP)

“I have no intention of firing him,” Trump told reporters in the Oval Office on Tuesday. “I would like to see him be a little more aggressive about the idea of ​​lowering interest rates,” he added.

Mr Trump also told reporters he would be very kind in negotiations with China and that tariffs on imports from the country would be “substantially reduced” after a deal, but not zero.

Earlier on Tuesday, US Treasury Secretary Scott Bessent said that although trade talks with China could be “difficult,” he believed trade tensions between the US and China would ease.

There has also been some positive news from publicly traded companies in their quarterly earnings reports. So far, 82 companies in the S&P 500 have reported; of those, 73% have beaten expectations, according to LSEG. However, the aggregate earnings growth for the S&P 500 was 8.1% in the January-March period, down from the 12.2% growth forecast at the start of the quarter, according to LSEG.

Still, “current earnings are showing a continuation of good fundamentals, which is no surprise,” said Bill Merz, head of capital markets research at US Bank Wealth Management, adding that investors are analyzing corporate guidance to “clarify what companies are planning to do in response to tariffs.”

The news helped to boost investor confidence, sending all three major US stock indexes up more than 2.5% after weeks of being buffeted by the White House's erratic tariff policies and Mr Trump's harsh criticism of Fed Chairman Jerome Powell.

The S&P 500 closed up 2.51%, or 129.56 points, at 5,287.76 on Tuesday. All 11 major sectors in the S&P 500 rose, with financials and consumer discretionary posting the biggest percentage gains.

The Dow Jones Industrial Average also rose 1,016.57 points, or 2.66%, to 39,186.98; the Nasdaq Composite rose 429.52 points, or 2.71%, to 16,300.42.

Advancing issues outnumbered declining ones by a ratio of 6.4 to 1 on the NYSE. On the Nasdaq, 3,580 stocks rose while just 796 declined, a ratio of 4.5 to 1.

In a sign that traders expect Wall Street to rise on Wednesday, stock index futures also rose nearly 2%. Specifically, S&P 500 futures rose nearly 2%, while Dow Jones futures rose 1.1%; Nasdaq futures rose 1.6%.

“The tsunami continues,” said Ryan Detrick, chief market strategist at Carson Group in Omaha, adding that expectations of a “thaw in the U.S.-China relationship, driven by Bessent’s comments, have helped push things higher.”

“Washington understands that the uncertainty around tariffs is hurting markets and perhaps we can get some positive news in the future on the trade front,” Detrick added.

Those uncertainties have prompted the International Monetary Fund to cut its forecast for US economic growth to 1.8% in 2025, citing the impact of US tariffs, which are now at a 100-year high.

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