Trump's Tariff Reversal Sparks 9.1% S&P 500 Surge, 12% Nasdaq Rally

US equities and cryptocurrencies experienced a significant surge on Wednesday following President Trump's announcement of a reversal in tariff policies. The Dow Jones Industrial Average gained 2,600 points in the afternoon, while the S&P 500 surged by 9.1%, marking the biggest intraday rally for both indexes in five years. The Nasdaq Composite rallied almost 12%, a daily gain not seen since 2008. Bitcoin and ethereum gained as much as 6% and 11%, respectively.

The market's positive reaction was triggered by Trump's announcement that reciprocal tariffs on all countries except for China would be delayed for 90 days. He also stated that the levy on Chinese imports, which had taken effect just after midnight, would be raised from 10% to 12.5%. Treasury Secretary Scott Bessent confirmed that tariffs on all countries other than China would remain at 10% in the interim. This announcement led to a decline in the 10-year Treasury yield, which had spiked to 4.51% overnight, falling to 4.3% following the White House’s announcement.

The cooling of the market followed a better-than-anticipated 10-year auction, indicating that demand remained high. Indirect bidders, which represent an imperfect proxy for foreign buyers, made up about 88% of accepted bids. This marked a change from the White House’s previous stance on tariffs, which had insisted that the new “Liberation Day” tariffs would proceed as scheduled. Commerce Secretary Howard Lutnick and Peter Navarro, White House senior counselor for trade and manufacturing, had both maintained that there would be no postponing of the tariffs.

While investors breathed a sigh of relief, the volatility was far from over. Markets now faced another three months of uncertainty about where tariffs would land. However, analysts’ general outlook had improved. Apollo chief economist Torsten Slok and Goldman Sachs analysts both rescinded their forecasts for a 2025 recession in the afternoon.

The auto industry was one of the first to react positively to the news. Auto stocks pulled higher as the market interpreted the tariff pause as a potential easing of trade tensions. The cryptocurrency market also saw a jolt higher, with Bitcoin spiking by more than 7% in the afternoon. This surge was part of a broader market relief rally, as investors welcomed the news of the tariff pause. The price of Bitcoin, along with other cryptocurrencies, had been under pressure due to the ongoing trade tensions and uncertainty in the global market. The pause on tariffs provided a much-needed boost to the crypto market, which had been struggling in recent weeks.

US shares also rocketed higher following the announcement. The pause on tariffs was seen as a positive development for the economy, as it could potentially reduce the cost of imports and ease inflationary pressures. Retail stocks, in particular, saw a significant spike, with some of the top performers being companies that make a significant share of their products in Vietnam. This was likely due to the fact that Vietnam was one of the countries that would have been affected by the tariffs, and the pause provided a relief to these companies.

The Nasdaq, which is heavily weighted towards technology stocks, was on pace for a 10% surge, its biggest single-day advance. This was a clear indication of the market's positive reaction to the tariff pause, as technology stocks are often seen as a barometer of investor sentiment. The pause on tariffs was seen as a positive development for the technology sector, as it could potentially reduce the cost of imports and ease inflationary pressures.

The market's reaction to the tariff pause was a clear indication of the impact that trade tensions have had on the economy. The pause on tariffs provided a much-needed relief to the market, as it reduced uncertainty and provided a boost to investor sentiment. However, it is important to note that the tariffs were not entirely removed, and there is still some uncertainty surrounding the future of US trade policy. The market will continue to monitor developments in this area, as any changes could have a significant impact on the economy and the stock market.