Bessent Sparks Turnaround Tuesday: April 22, 2025

Stocks are recovering from yesterday’s losses as perceived progress on the trade front and well-received earnings reports provide reprieve to investors. Negotiations have been moving forward with some key US allies and getting closer to the finish line, propelling hopes of a lighter impact to domestic and international growth. And despite a lack of understanding between Washington and Beijing, Treasury Secretary Bessent added fuel to the fire by remarking that the standoff is essentially an embargo and unsustainable. He also bolstered confidence by mentioning his expectation of a de-escalation in the conflict of the world’s two largest economies. In light of tense conditions related to cross-border commerce, the IMF cut its GDP forecasts for America and the globe by 0.9% and 0.5%. Still, it’s turnaround Tuesday and market participants are scooping up equites across sectors, long-end Treasuries, forecast contracts, and bitcoins, while also boosting exposures to cyclical commodities and the greenback. Traders are reducing their hedges, short-end US debt and safe-haven gold.

Equities Stage Broad Rally

On another light day on the stateside economic calendar, investors are focused on corporate earnings and most importantly, developments from Washington that have become increasingly binary. All major equity benchmarks are trading much higher with the Russell 2000, Nasdaq 100, Dow Jones Industrial and S&P 500 indices climbing 2.4%, 2.4%, 2.3% and 2.2%. All eleven sectors are advancing, led by consumer discretionary, financials and communication services, which are producing gains of 2.9%, 2.9% and 2.3%. Treasurys are getting bought at the long-end but sold from the 7-year maturities and shorter. The 2- and 10-year instruments are changing hands at 3.81% and 4.39%, 4 basis points (bps) heavier on the former but 2 bps lighter on the latter. The potential for incoming trade deals is helping the greenback; its index is up 54 bps as the US currency appreciates relative to most of its major counterparts, including the euro, pound sterling, franc, yen, yuan and Aussie tender. It is depreciating against the loonie, however. Cyclical commodities are catching bids on better growth prospects and gold is taking a break from its record run on weaker safe-haven demand and is down 1%. Copper, crude oil, silver and lumber are up 2.6%, 1.7%, 0.8% and 0.7%.

Modest Illumination in the Trade Tunnel

Today’s collection of news developments added a little more light to the lengthy trade tunnel that investors have been navigating. But the lack of illumination is still likely to generate some trips, slips and falls along the journey, as President Trump and his cabinet grapple with foreign allies and adversaries alike for beneficial trade deals. The road ahead is increasingly binary in the short-term, as rising confrontations weigh on markets and growth while more collaboration help asset prices and economic activity. Finally, a break from the Trump-Powell déjà vu is also contributing to this turnaround Tuesday.