(Reuters) - The benchmark S&P 500 US stock Index rallied to a two-week high 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%.
The three main indexes were already in recovery mode after Trump said late on Tuesday he had "no intention" of firing Powell, walking back last week's market rattling comment that the Fed chair's termination could not come "fast enough" that had drawn heavy criticism.
At point they were all up more than 3%. In late afternoon trade the Dow Jones Industrial Average was up about 1%, the S&P 500 up 1.7% and the Nasdaq Composite 2.7%.
COMMENTS:
RUSSELL PRICE, CHIEF ECONOMIST, AMERIPRISE, TROY, MICHIGAN
"With those worst-case scenarios, for the most part, seeming to be taken off the table, markets have, or stocks, I should say, have reason to rise somewhat off of their bottoms, or their lows.
"We have to kind of step back and realize that we're only three months into this situation, maybe we could even say we're less than a month into it, given if we use April 2nd as our starting point. If things were to resolve relatively soon, and the picture stabilized, I think that the native repercussions as far as long-term perceptions of the United States on the global, not just the economic front, but on many fronts, would improve slowly. But if this carries over into, say, the second half of the year, and there's still a lot of uncertainty remaining, then I think the longer this remains out there, the more entrenched those data perceptions could become."
"A softening of the stance on tariffs and trade policy with China and maybe a signal of willingness to try to find a deal, to walk back from the peak tensions, is exactly what the market wants to hear."
"When you see this type of positive surge over a couple of days, based on the potential of a ratcheting down in the rhetoric and maybe a move towards some sort of a plan to find a solution with China, I think it tells you that investors think there is a chance that a recession could still be avoided."
"It's still a market that's characterized by the degree of policy uncertainty that we're seeing. It's been the tariff and trade story for a while. More recently, it's been questions about the ability of the Fed to maintain its independence... I think it's about all of the political and policy uncertainty and what it could mean for the economy in the near term."
"It seems like (the reasons for the stock market snapback are) multifold. One, some of the comments that have come out of the White House here in the last 24 hours are more positive relative to tariffs, especially China. Two, the comment that (Trump) is not going to fire Powell, even though he probably can't, took some of that uncertainty off the table. Three, you've had some earnings announcements that have been pretty decent. And then finally, you've got short sellers out there really thinking about their positions, especially on the back of yesterday and then strength beginning today. And so I think structurally, you've got a lot of continued short covering that's going on that's driving things higher."
AMELIE DERAMBURE, SENIOR MULTI-ASSET PORTFOLIO MANAGER, AMUNDI, PARIS
"Markets are really hoping that the worst will not happen and are really giving a chance to negotiations and less tariffs being implemented. That's an important element which is lifting U.S. equities, but also as a consequence, global equities, including European ones."
PETER CARDILLO, CHIEF MARKET ECONOMIST AT SPARTAN CAPITAL SECURITIES, NEW YORK "There seems to be some light at the end of the tunnel here in terms of the trade war. Investors are beginning to feel more confident that perhaps the worst of the trade rhetoric is over, that we've probably hit a temporary short-term bottom and stocks are likely to move a little bit higher in the coming days."
PETER ANDERSEN, FOUNDER OF ANDERSEN CAPITAL MANAGEMENT, BOSTON"Whether or not they are permanent statements or transient statements, we still do not have enough evidence to take a stand one way or the other. Certainly the market doesn't agree with me because the market responds instantaneously to any good or bad news as we're seeing today."
"In my view, unless the President or the administration comes out with consistent statements and, by consistent, I mean by more than a 24-hour news cycle, this is a temporary rally."
"However, it is showing signs, these types of rallies based on news like this certainly act as a guidepost for what the investors are hoping to have as a resolution. We see that anytime there is a hint of not firing the Fed or easing on the tariffs or close to a tariff agreement, we see a very strong rally for the day, but not necessarily over the longer term."
(Compiled by the Global Finance & Markets Breaking News team)
