S&P500, Nasdaq Composite, Dow Jones rebound up to 3% as trade optimism tempers tariff turmoil

The CBOE Volatility Index, or VIX, which had spiked to 60 on Monday—a level often associated with panic selling—eased back below 40 on Tuesday

Wall Street's main indices snapped a brutal three-day losing streak on Tuesday, staging a powerful comeback as investors latched onto renewed hopes of a diplomatic thaw in the global trade standoff.

The Dow Jones Industrial Average soared 1,000 points, or 2.71 percent. The S&P 500 and Nasdaq Composite followed suit, gaining 3.4 percent and 3.2 percent respectively, as beaten-down tech stocks led the charge higher.

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Driving the rebound was a mix of political signalling and diplomatic chatter. US President Donald Trump, in a post on Truth Social, said he had a "great call" with South Korea’s acting president and claimed that China was "eager" to strike a trade deal. Stock futures, already pointing higher, extended their gains after the post.

Meanwhile, U.S. Treasury Secretary Scott Bessent said that nearly 70 countries had reached out to Washington to explore tariff negotiations. "If they bring strong proposals to the table, we could walk away with some constructive outcomes,” Bessent said while hinting that a partial rollback of tariffs may be in the cards.

Tuesday’s surge came after a nerve-racking Monday session that saw the Dow swung 2,595 points between its high and low before settling nearly 350 points lower. It was the most active day for U.S. equity markets in at least 18 years, with nearly 29 billion shares changing hands. The S&P 500 even dipped briefly into bear market territory during Monday’s sell-off—down more than 20 percent from its peak—before trimming losses into the close.

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Despite escalating rhetoric overnight—Chinese government said that it will "fight to the end" following Trump’s threat to impose another 50 percent tariff if Beijing retaliated—investors appeared ready to scoop up discounted shares, especially in tech. Nvidia jumped 6 percent, while Meta Platforms rose 5 percent. Tesla surged more than 6 percent, and Amazon and Netflix both gained over 4 percent.

The CBOE Volatility Index, or VIX, which had spiked to 60 on Monday—a level often associated with panic selling—eased back below 40 on Tuesday, suggesting that some of the fear gripping markets may have started to subside.

European markets staged a strong recovery on Tuesday, snapping a four-day losing streak as investors found their footing amid easing fears over global trade tensions. The pan-European Stoxx 600 jumped 2.6 percent by early afternoon in London, with gains spread across nearly all sectors and major regional indices trading in the green.

The sharp turnaround followed a bruising start to the week. On Monday, the Stoxx 600 had tumbled roughly 4.5 percent, closing at its lowest level since January 2024. Benchmark indices in the UK, Germany, and France—the FTSE 100, DAX, and CAC 40—had all suffered steep declines as tariff worries swept global markets.