S&P 500, Nasdaq 100 erase 2025 drop as trade hope sparks rebound

The S&P 500 and Nasdaq 100 indexes turned higher for the year on Tuesday, reversing a multitrillion dollar routs, as enthusiasm for U.S. stocks grows with global trade tensions cooling after the Trump administration and China agreed to temporarily lower tariffs.

The tech-heavy Nasdaq 100 crossed the line first and rose 1.2 per cent as of 10:16 a.m. in New York, putting it up 0.5 per cent in 2025. The S&P 500 followed less than an hour later, climbing 0.8 per cent to put its 2025 gain at 0.1 per cent. Investors also were encouraged by the latest consumer price index reading Tuesday morning, which showed inflation rose less than expected in April, indicating that so far companies have had little urgency to pass on costs from higher tariffs.

The Nasdaq 100 had been down 23 per cent from its Feb. 19 high to its April 8 low, after President Donald Trump slapped broad tariffs on America’s key trading partners. The S&P also hit its low then, and was down 15 per cent for the year at the time Mega-cap tech names have powered the rebound, with Microsoft Corp., Nvidia Corp. and Apple Inc. each rising more than 20 per cent since then.

While the S&P 500’s plunge after Trump’s tariff announcement on April 2 was dizzyingly fast — 11 per cent in just two sessions — its bounce back has been almost as breathless. The index rose 17 per cent from April 14 to May 2, the kind of thing that historically happens when the market is recovering from a major catastrophe, like the dot-com bust, the 2008 financial crisis and the Covid-19 pandemic. It rose for nine straight sessions in late April and early May — its longest winning streak in two decades — gaining 10 per cent in that stretch.

Hope for a resolution to President Donald Trump’s tariff fights with America’s key trade partners is driving much of the investor enthusiasm. On Monday, the U.S. said it would reduce its combined 145 per cent levies on most Chinese imports to 30 per cent, and China said it would cut its 125 per cent duties on U.S. goods to 10 per cent. This comes on the heels of last week’s agreement between the U.S. and U.K. on a framework for a trade pact. However, in both cases final deals appear to be a ways off.

“With the ‘getting off the schneid’ moment of the U.K. announcement followed by the dramatic de-escalation of the China trade situation over the weekend, the man-made market crisis is now in the process of being un-man-made,” said Scott Ladner, chief investment officer at Horizon Investments.

Technology stocks have had a rollercoaster start to the year, taking a major hit early on as Chinese artificial intelligence company DeepSeek sent shockwaves through the markets. Then the tariff turmoil hit the shares particularly hard, given their exposure to global supply chains and their premium valuations that leave little room for error.

Better Than Feared

Encouraging earnings is adding to the recent enthusiasm for tech shares, as first-quarter results from the biggest names largely came in better than feared. Forecasts from Microsoft to Amazon.com Inc. suggest demand remains largely intact for electronic devices, cloud computing services, software and digital advertising. While the results were by no means perfect — Apple was a high-profile disappointment — they eased fears that the firms would signal a tariff-induced profit slump was on the immediate horizon.

U.S. equities began 2025 with a string of gains as investors expected Trump’s administration to usher in a pro-growth agenda. However, the swings in the president’s tariff fights introduced an extreme level of uncertainty to the market. Levies on Canada and Mexico went on and then quickly came off. Similar back-and-forth moves landed on the European Union, while China and the U.S. traded increases in levies against each other’s imports. Exceptions for some products cloud the picture further.

All of that has raised questions about the resilience of American growth and stoked inflation fears. The University of Michigan’s latest consumer survey showed consumer sentiment falling to one of the lowest readings on record while expectations for inflation over the coming year spiked to the highest in four decades. The Federal Reserve, meanwhile, remains caught between vigilance against price increases and the potential for a cooling labor market to need support.

So, while stocks have recouped their losses for now, market pros warn that investors should tread cautiously.

“The reprieve is welcome and will allow companies to restock, but this has been an artificially manufactured crisis,” said Michael O’Rourke, chief market strategist at Jonestrading, who expects the uncertainty to continue as the deal with China is temporary. “It is extremely challenging for investors when the rules are changing on a week-to-week basis.”

Esha Dey, Bloomberg News

©2025 Bloomberg L.P.