S&P 500 Jumps on Bets Rate Cuts May Happen Sooner Than Expected

Major U.S. equity indexes are look to extend a two-session win streak brought about by President Donald Trump seemingly rethinking some of the more aggressive elements of his approach to trade and the Fed.

“Now that the market has retraced a reasonable amount of its losses, it can start the process of continuing that momentum,” said David Laut, chief investment officer at Abound Financial. “While the market’s recovery is not going to be in a straight line, it’s encouraging to see the market start to price-in a post-tariff environment.”

Bets on the Fed cutting rates sooner than expected helped lift stocks. Fed Governor Christopher Waller told Bloomberg Television on Thursday that he would support rate reductions in the event of tariffs driving job losses.

Meanwhile, in an interview with CNBC, Fed Bank of Cleveland President Beth Hammack said officials could move as early as June if it had clear evidence of the economy’s direction.

“What’s needed for a real return to form for markets that had happily become used to a period of exceptionalism, is the one thing Donald Trump seems unlikely to deliver, certainty,” said Danni Hewson, head of financial analysis at AJ Bell.

In terms of economic data, applications for unemployment benefits saw a slight pick up, reflecting a stable labor market. And sales of previously owned homes fell by the most since 2022 in March.

Earlier, China demanded that the U.S. revoke all unilateral tariffs and denied there were talks between the two sides on reaching a deal. Beijing also called reports on a development in talks “groundless” and urged the U.S. to “show sincerity” if it wants to make a deal.

Amid the latest turn in the U.S.-China trade dispute, the Financial Times reported the Trump administration was considering reducing tariffs on Chinese car parts ahead of the May 3 deadline that had drawn the ire of global carmakers.

“So far market seems relatively quiet and has digested the China tariffs comments,” said Joe Saluzzi of Themis Trading. “I think we all have ‘tariff fatigue’ at this point.”

Meanwhile, investors poured over a flurry of earnings reports that painted a picture of unease. International Business Machines Corp. dropped amid disappointing earnings and as the company indicated that economic uncertainty and U.S. government cost cuts may dent its business.

PepsiCo Inc. shares fell after posting a rare miss on earnings per share and cutting its full-year profit view on global trade uncertainty.

The stock reaction to guidance changes were not entirely negative, however. Chipotle Mexican Grill Inc. gained despite lowering its full-year outlook as quarterly sales declined for the first time in almost five years. American Airlines Group Inc. withdrew its annual earnings outlook but the carrier managed to climb higher.

“Managements are providing cautious or no guidance, though that was widely expected, and the market reactions have been encouraging,” said Nationwide’s Mark Hackett.

Hackett added that this was in stark contrast to the last few years, where the market entered earnings season with “elevated expectations, and reactions were unenthusiastic.” Investors are “looking forward to the emotion of the market settling down” after several weeks of whipsaws, he noted.

Alphabet Inc. takes top billing in the flurry of earnings that come after the bell. The Google parent will set the tone for tech earnings this season, though there are worries that it may be a bum note.

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