MW Why investors are putting tariff and recession fears aside as stocks rebound

The S&P 500 and Nasdaq Composite briefly appeared to be headed for their best days since November 2022, as oil and most Treasury yields rose on Tuesday.

A sense of normalcy appeared to be returning for investors in Tuesday's trading session, putting the S&P 500 and Nasdaq Composite briefly on track for their best performances in more than two years, while oil and most Treasury yields climbed.

The reasons behind Tuesday's price action boiled down to the idea that market participants have moved past the worst possible outcomes and greatest uncertainty about U.S.-imposed tariffs. Just a day ago, stocks, bonds, gold and oil were all selling off as anecdotal information emerged that leveraged investors were being forced into liquidations. Now, investor sentiment is getting a lift on reports that Japan is set to get priority treatment in trade talks with the U.S. and Vietnam is rushing to Washington for negotiations after offering 0% tariffs on U.S. goods. Anywhere between 50 to as many as 70 countries have reached out to negotiate, Treasury Secretary Scott Bessent told Fox Business on Monday.To be sure, much can still change between now and the implementation of any trade deals, leaving investors and traders exposed to possibly more uncertainty and selloffs. For one thing, questions are being raised about whether Tuesday's moves amount to a so-called dead-cat bounce, or a small and brief recovery from falling asset prices. Moreover, factors not directly tied to trade - such as a $39 billion 10-year note auction scheduled for Wednesday, followed the next day by a $22 billion sale of 30-year bonds - have the potential to draw weak demand and could lead to a Treasury-market selloff that might spill into the broader market. Nonetheless, investors and traders craving for tariff-related resolutions were grasping onto whatever signs of hope they could. "The market is starting to find that countries are coming to the table to talk about more appropriate percentages on tariffs, which are around 10% and acceptable from our perspective," said Peter Azzinaro, a partner and senior portfolio manager at Agile Investment Management in Florida. "Tariffs are not going away. It is about getting to more appropriate levels that are fair on both sides." He added that "dislocations in negotiations - with both sides leaving the table, or Japan and Vietnam coming to D.C. and walking away, would be a disappointment to the market and lead to a further leg lower in terms of risk sentiment. We think they are unlikely to walk away and are coming to do a deal."As of Tuesday afternoon trading, the Dow Jones Industrial Average DJIA was up by more than 700 points, or 1.9%. The S&P 500 SPX rose 1.7% and the Nasdaq Composite COMP climbed 1.5% after pulling back from their session highs. Earlier in the session, the Dow appeared to be headed for its best performance since Nov. 6, or the day after the Nov. 5 presidential election, while the S&P 500 and Nasdaq seemed poised for their biggest jumps since November 2022, based on preliminary figures from Dow Jones Market Data. Meanwhile, Treasury yields were rising, led by a jump in the 1-year T-bill rate to 3.93%, as fed-funds futures traders priced in a slightly greater likelihood of no rate cut from the Federal Reserve by May. Gold (GC00) was up 1.1% from its lowest settlement level in over three weeks, at $3,006.50 per ounce. U.S. benchmark crude-oil prices (CL.1) stabilized near $60.79 after settling at an almost four-year low on Monday.It was a turnabout from the sell-everything trading environment of Monday's session, which was accompanied by a sinking U.S. economic outlook. DoubleLine Chief Executive Jeffrey Gundlach told CNBC on Monday that leveraged investors had been forced into liquidations since last week.On Monday, the Dow and S&P 500 finished with their biggest three-day percentage declines of the past five years. Investors sold off both gold and Treasurys despite their reputations as being among the world's safest havens. Crude oil fell for a third session to its lowest settlement since April 13, 2021. And long-term breakeven inflation rates, or measures of future price gains derived from the difference between yields on nominal Treasurys and Treasury inflation-protected securities, collapsed. Read: Even 'safe haven' trades like Treasurys are falling on Trump's tariffs. What does that tell investors?Adam Turnquist, chief technical strategist for San Diego, Calif.-based LPL Financial, said "indiscriminate" selling was being seen, with people selling "what they have to," instead of what they wanted to. Now, however, "we are past peak uncertainty on tariffs and that matters to the market," he said via phone on Tuesday. "We are moving away from the sticker shock of tariff announcements last week to negotiations, and that's enough to stabilize the selloff and for buyers to at least dip their toes back into this market," the strategist said. Not even China's threat to fight back against U.S.-imposed tariffs and the European Union's own possible retaliatory tariffs on some U.S. imports were enough to damp the mood on Wall Street.At Global X, a provider of exchange-traded funds based in New York, Scott Helfstein, head of investment strategy, said unprecedented uncertainty about the economy and wild market moves are likely to persist. Nonetheless, Helfstein said, high-quality assets can be found at reasonable valuations. Among other things, the strategist also recommended that investors hedge their exposures with "covered calls that can generate returns in sideways markets," and take advantage of the recent selloff to buy "good, long-term secular growth themes."

-Vivien Lou Chen

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April 08, 2025 12:39 ET (16:39 GMT)

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