All three major US indexes rose by more than 2% following White House press secretary Karoline Leavitt’s comments that Trump was “setting the stage for a deal with China.”
The Dow ended 2.7% higher while the broad-based S&P 500 climbed 2.5%t.
Europe’s main indexes logged gains as well, as the region’s trading resumed after a long-weekend break for Easter.
Earlier Tuesday, gold reached US$3,500 an ounce for the first time as Trump’s sweeping tariffs and verbal assault on Federal Reserve policies prompted investors to snap up the safe-haven asset.
Asian indexes closed mixed, while oil prices firmed.
“Looking at today’s rebound for equities, you might be forgiven for thinking that financial markets have forgotten all about Trump’s threats to fire Powell,” said IG analyst Chris Beauchamp, referring to Fed chairman Jerome Powell.
Panicked Wall Street investors dumped US assets on Monday, with all three main indexes ending down around 2.5%, after Trump took another in a series of swipes at the Fed chair.
The president last week criticised Powell over the latter’s warning that the White House’s sweeping levies would likely reignite inflation.
Trump sent shivers through markets Monday by again calling on Powell to make pre-emptive cuts to US interest rates.
The outbursts have fanned concern that Trump is preparing to oust the head of the US central bank. Trump’s top economic adviser Kevin Hassett said Friday that the president was looking at whether he could do so.
But Wall Street rebounded strongly on Tuesday.
Briefing.com analyst Patrick O’Hare put part of the rebound down to sentiment that Trump would not fire Powell, and instead was “simply setting him up now to take the blame in the event of an economic downturn.”
Markets also climbed after US treasury secretary Scott Bessent told a closed-door event in Washington that he expected a de-escalation soon in the US’ tariff standoff with China.
Later in the day, Leavitt told reporters that “the president and the administration are setting the stage for a deal,” noting that “the ball is moving in the right direction.”
All eyes were on Tesla, too, as the company reported financial results after the closing bell.
It announced a 71% drop in first-quarter profits Tuesday, in results that lagged analyst estimates. The electric vehicle producer warned of a hit to demand due to “changing political sentiment.”
Tesla shares were up 0.4% in after-hours trading.
Its shares have tanked more than 35% from the start of the year as Elon Musk’s political role in the Trump administration has dented the brand’s image. The carmaker has also been caught up in tariff turmoil.
Separately, investors largely shrugged off the International Monetary Fund saying Trump’s new tariff policies would take a big bite out of global growth, with many already having factored in their impact.
The IMF now sees the global economy growing by 2.8% this year, 0.5 percentage points lower than its previous forecast in January.