By Jack Pitcher

Stocks rallied for a third straight session Thursday, lifting the Nasdaq Composite's weekly gain above 5% amid hopes for trade deals and lower interest rates.

The relief rally that began with trade deal optimism earlier in the week gained fresh legs with a major boost from technology shares. And investors hoping for rate cuts later this year cheered dovish comments from Federal Reserve officials Thursday.

The gains came despite few concrete developments on the trade war front. President Trump told reporters in the Oval Office that U.S. officials met with Chinese counterparts Thursday morning but declined to elaborate further. Beijing played down hopes for an imminent rapprochement, saying it hasn't held negotiations with the U.S., "let alone reached an agreement."

Stock trading continues to be volatile in both directions, reflecting a high level of uncertainty, analysts say. For now, investors are clinging to optimism stoked by Treasury Secretary Scott Bessent's comments earlier this week that he expects that trade war with China to de-escalate. On Thursday, Bessent said that the U.S. and South Korea might be able to come to a trade agreement as early as next week.

"Bear market rallies are short, sharp and ferocious," said Steve Sosnick, chief strategist at Interactive Brokers. "People are psyched about this move to the upside, but it's still very volatile. That reflects uncertainty, though for now the mood has flipped from fearful to optimistic."

The S&P 500 officially exited correction territory on Thursday and has now made back a substantial portion of the year's losses, closing Thursday down 5.8% in 2025 after being down as much as 15% on April 8. The S&P 500 and Dow Jones Industrial Average remain in a bull market, while the Nasdaq entered bear market territory -- down 20% from its most recent high -- on April 4.

One reason stocks are holding up in the face of severe tariffs on Chinese imports lies in companies' recent earnings reports, Sosnick said. While many companies have abandoned prior earnings guidance, revisions to the downside generally haven't been severe.

"If you still believe that double-digit earnings growth is achievable this year, the market is not necessarily overpriced," Sosnick said.

Tech shares soared Thursday as investors piled back into what has long been one of their favorite trades. Tech stocks tend to perform well when interest rates are lower, and Fed officials hinted at that possibility Thursday. The Nasdaq rose 2.7% Thursday and is 5.4% higher this week.

Fed governor Christopher Waller said in a Bloomberg TV interview that tariff-related price increases weren't likely to kick off a sustained bout of inflation, so the central bank should be wary of overreacting.

"But if I see a significant drop in the labor market...I think it's important that we step in," Waller said.

Meanwhile, Federal Reserve Bank of Cleveland president Beth Hammack suggested in a CNBC interview that the Fed could move its policy rate at its June meeting.

As earnings season rolls on, investors are closely watching for clues on how the economic and market turmoil is affecting companies and consumers. Companies including Chipotle, PepsiCo and Merck have warned that tariffs are likely to drive up costs.

Google-parent Alphabet, a bellwether for the tech industry, reported better-than-expected profits after Thursday's close.

Stocks are heading into Friday on track for a banner week, with the S&P 500 up 3.8% and the Dow advancing 2.4%.

"The market's strong rebound reflects growing confidence that the most adverse outcome can be avoided," wrote Ulrike Hoffmann-Burchardi, UBS Global Wealth Management's chief investment officer for global equities, in a note to clients Thursday. She added, however, that "upcoming news flow will likely continue to drive short-term swings."

Write to Jack Pitcher at jack.pitcher@wsj.com

(END) Dow Jones Newswires

April 24, 2025 16:48 ET (20:48 GMT)

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