Stocks roar higher, bonds sell off as Trump pauses most reciprocal tariffs

Stocks ripped higher and bond yields jumped Wednesday after the White House pulled back on its trade war.

The S&P 500 was up 414 points, 8.3%, to trade near 5,397, while the Dow Jones Industrial Average added 2,680 points, or 7.1%, to top 40,000. The tech-heavy Nasdaq Composite surged 1,608 points, 10.5%, to trade near 16,876 in the mid afternoon.

Shortly after 1 pm ET, President Donald Trumpsaid he was pausing reciprocal tariffs on all countries for 90 days while raising China's levy to 125%.

That followed a pledge from China to raise its tariff on U.S. goods to 84% after hefty new tariffs on its goods took effect at 12:01 a.m. ET on Wednesday. During the day, the European Commission, which represents the European Union, approved a set of tariffs to start April 15, calling U.S. tariffs "unjustified and damaging, causing economic harm to both sides, as well as the global economy.”

Read next: China slams US with 84% tariff after new wave of Trump levies: Live updates

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Since Trump unveiled his tariffs April 2, the S&P 500 has shed more than $5.83 trillion in market value and was down 19% from its peak at the end of trade Tuesday, teetering on the edge of a bear market.

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What are the financial markets saying about tariffs?

Earlier on Wednesday, JPMorgan Chase CEO Jamie Dimon said he believes the financial market turmoil is likely to tip the U.S. economy into recession. “I think probably that’s a likely outcome, because markets, I mean, when you see a 2000-point decline [in the Dow Jones Industrial Average], it sort of feeds on itself, doesn’t it,” Dimon said on Fox Business’ “Mornings With Maria” show. “

After Trump's afternoon announcement, the CBOE volatility index, which is known as Wall Street's 'fear gauge,' slid 31% to 36, after earlier touching its highest since the COVID-19 panic of 2020. Bitcoin jumped more than 6%.

"We are now in the realm of VIX levels that demand a policy response if stocks are to stabilize," wrote Nicholas Colas, Co-founder of DataTrek Research, in a Wednesday morning analysis. "We need to see the VIX at 80 (2008, 2020 peaks) or at least 62 (March 2020 bottom for the S&P 500) before thinking of calling a near term low for U.S. large caps," Colas added.

What is going on in the bond market?

The 10-year U.S. Treasury note was up 13 basis points to 4.39 as a multi-day bond rout continued. Bond yields rise as prices fall, and vice versa. Treasury "trading activity has been massive," said Oxford Economics Lead U.S. Analyst John Canavan, in a note out Wednesday morning.

While many pundits have suggested investors might start to sell U.S. government debt in a retreat from American assets, analysts at Goldman Sachs wrote Wednesday that they believe such a trade is not currently in play. The sell-off is more likely due to "a reassessment in fiscal risks in the context of a potential downturn," they wrote, as well as the combination of "growth downside and inflation upside risks."

On Wednesday, St. Louis Fed President Alberto Musalem told Reuters that he was concerned about those same trends.

Musalem, who is a voter on the central bank's policy-setting committee, said he did not expect a recession, but expects U.S. economic growth to slip "materially" below trend and the unemployment rate will rise over the year as firms and households adjust to prices driven higher by new import tariffs.

Minutes from the central bank's March policy meeting showed officials were concerned inflation could remain "persistent." A consumer price inflation reading set for Thursday could offer more clues on the outlook for prices.

More: What exactly is a recession? Economists say odds of one in the US are 'very high.'

Stocks gaining and losing

Pharmaceutical stocks were mixed Wednesday after Trump said Tuesday night that the industry could face fresh tariffs. Shares of Tonix Pharmaceuticals lost 10% in the early afternoon.

Delta Air Lines dropped its outlook for 2025 Wednesday amid recession and trade war concerns. “With broad economic uncertainty around global trade, growth has largely stalled," CEO Ed Bastian said in a statement. Shares of Delta and other airlines were up 20% after Trump's announcement.

At a Wednesday investor conference, Walmart said it continued to expect first-quarter sales growth of 3% to 4%. But the retailer said it could no longer provide guidance for first-quarter operating profit growth because of the trade war. The stock was 9% higher in afternoon trade.

Beaten-down tech stocks rebounded: Apple Inc. and Nvidia Corporation shares each gained about 12%, at last check.