The Dow Jones industrial average jumped more than 500 points Tuesday as investors welcomed signs that the Federal Reserve may cut interest rates to help buttress U.S. economic growth in the face of escalating trade wars.
Optimism about a resolution to one of those trade disputes and a rebound in technology shares also boosted the market. The Dow vaulted 512.40 points, or 2.1%, to 25,332.18. The benchmark S&P 500 index notched its best day since Jan. 4, gaining 58.82 points, or 2.1%, to 2,803.27.
The Nasdaq composite rode the rally in technology stocks to a gain of 194.10 points, or 2.7%, to 7,527.12. The index recouped the losses it racked up a day earlier, when tech stocks slumped over concerns that several big internet companies could face more scrutiny from antitrust regulators.
Federal Reserve Chairman Jerome H. Powell spurred the rally when he said the central bank was “closely monitoring” trade developments and would “act as appropriate” to sustain the U.S. economic expansion. Investors read his remarks as a signal that the Fed will likely cut interest rates later this year.
Investors have been worried the expanding conflicts between the U.S. and some of its biggest trading partners could slow U.S. economic growth and stymie corporate profits. They've been dumping stocks for the past month and fleeing to safer holdings such as bonds.
Fresh hopes for a resolution in the U.S.-Mexico trade dispute also helped put investors in a buying mood. Mexican Foreign Minister Marcelo Ebrard said that Mexico can likely reach a deal with the U.S. at a meeting Wednesday. That would stave off President Trump's threat to place 5% tariffs on Mexican goods beginning June 10 as part of a broader immigration dispute.
Automakers rallied as traders bet that the U.S. and Mexico will work out their trade issues. Many automakers import vehicles from Mexico and would be hit particularly hard if the U.S. imposes tariffs. Ford Motor climbed 3.2%, General Motors gained 6% and Fiat Chrysler added 4%.
Chipmakers were among the biggest gainers in the technology sector. Nvidia jumped 6.9% and Advanced Micro Devices climbed 7.2%. Other technology companies rallied. Microsoft rose 2.8% and Apple added 3.7%.
Banks also posted solid gains as bond prices fell, driving yields on the 10-year Treasury note to 2.12% from 2.08% late Monday. Banks benefit from higher yields because they can charge more interest on loans. Bank of America rose 4.6% and Citigroup gained 5.2%.
Energy futures closed mostly higher Tuesday. Benchmark U.S. crude gained 0.4% to settle at $53.48 a barrel. Brent crude oil, the international standard, closed 1.1% higher at $61.97 per barrel.
Gold inched 0.1% higher to $1,328.70 per ounce, silver added 0.2% to $14.77 per ounce and copper rose 0.7% to $2.67 per pound.