Markets rally as fed independence and tariff relief ease fears. Tech and financials lead gains; volatility dips, but caution remains.

Hi everyone, Kevin Crandell with North State Wealth Management, back here with your midweek market update. Let’s jump right in. Markets surged today after President Trump made some calming remarks that hit two of the biggest market nerves lately, interest rates and tariffs.

First, he reaffirmed Federal Reserve independence, stating that Fed Chair Jerome Powell’s job is safe even if he doesn’t cut rates. Now that’s a big deal because I don’t know if you noticed, but markets were getting a little jittery about potential interference, so this helped to ease those tensions. Second, Trump said tariffs on China would be substantially reduced if a trade deal is reached.
That added fuel to the rally as the tariff story has been one of the major overhangs on global markets. Now let’s look at some numbers. U.S. stocks are up solidly across the board today.

Tesla jumped after posting soft but expected earnings, and CEO Elon Musk announced that he’ll be refocusing on the company in May and pulling back from his role at the Department of Government Efficiency. Now, treasury yields dropped, especially on the long end of the curve, a sign that investors are feeling a little more comfortable but still cautious. Now, the dollar firmed up after recent weakness, and overall sentiment improved notably.

Globally, we saw a similar boost in risk appetite. European markets rallied, led by tech and materials stocks, despite another dip in PMI data, especially from the services sector. Defense names underperformed after reports that Russia may halt its invasion at the current front lines in Ukraine.

Now, Asia followed suit with strong overnight gains, and Taiwan led the way, bouncing back on semiconductors, and Japan also showed strength. Hong Kong hit a two-week high, and South Korea’s tech-heavy index advanced as well, while mainland China was more mixed. Now, on the volatility front, here’s something to watch.

According to LPL research, they highlighted that economic policy uncertainty and market volatility, as measured by the VIX index, both spiked recently but are now falling, and that suggests we may be past peak fear in the markets, although both indicators remain at elevated levels. So, in short, we’re not out of the woods yet, but we’re also not in panic mode. A few more things to pay attention to.
Financials and big tech led Tuesday’s rebound, helping offset Monday’s market dip. LPL is drawing some historical parallels between the magnificent seven tech leaders of today and the nifty-fifty stocks of the 1970s, showing how a handful of names are driving the majority of returns. And finally, treasury market volatility has spiked, not because investors are losing faith in treasuries, but because hedge funds are unwinding leveraged trades.

LPL sees this as technical, not fundamental, and continues to view U.S. treasuries as the world’s go-to safe haven. Well, that’s it for today. The tone in the market right now is improving, but as always, we’ll be watching closely for follow-through on trade negotiations, earnings, and more economic data as it comes out.
Thanks for tuning in, and we’ll talk soon.

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