Both the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) closed in positive territory on Tuesday after President Trump softened his stance on an earlier threat to increase the tariff rate on China by an additional 100%.
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“Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment. He doesn’t want Depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!!!” Trump said in a Truth Social post.
Treasury Secretary Scott Bessent added that a previously scheduled meeting between Trump and Chinese President Xi Jinping at the Asia-Pacific Economic Cooperation (APEC) Summit in South Korea is still expected to take place. “He will be meeting with party chair Xi in Korea — I believe that meeting will still be on,” Bessent said in an interview with Fox Business on Monday.
Meanwhile, Trump signed a Gaza peace plan during a summit in Sharm el-Sheikh, Egypt, with over 20 world leaders in attendance. “Nobody thought this could happen,” Trump said at the summit. “With the historic agreement we have just signed, those prayers of millions have finally been answered.”
However, it’s worth pointing out that representatives from Israel and Hamas weren’t present at the summit. The two sides remain locked in negotiations, which include security measures and how Gaza will be governed in the aftermath of the war.
Earlier in the day, Trump spoke in front of the Knesset, Israel’s Parliament, emphasizing the end of the Gaza war and the “historic dawn of a new Middle East.” He also said that “phase two” of the plan had begun after both Israel and Hamas agreed to release hostages.
Finally, Philadelphia Fed President Anna Paulson has warned that AI momentum has masked weakness in the economy, particularly in the labor market. “But in the more immediate term, the relatively narrow base of support for the labor market, the importance of high-income consumers together with the prominence of the narrative around AI for equities, adds up to a relatively narrow base of support for growth over the next year or so,” said Paulson at the National Association for Business Economics Annual Meeting in Philadelphia.
She notes that spending among high-income earners is still solid given their allocation to the stock market, which has performed well this year. At the same time, the performance has largely been driven by just a few firms, such as the Magnificent 7. Paulson cautioned that AI momentum could be getting ahead of itself, and that future demand for its applications is still uncertain.
The S&P 500 (SPX) closed with a 1.56% gain, while the Nasdaq 100 (NDX) returned 2.18%.
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