In an explosive turnaround for the US markets, stock indexes saw record-breaking gains on Wednesday after former President Donald Trump announced a temporary pause on heightened tariffs. The S&P 500 surged 9.5%, the Nasdaq 100 rocketed 12%, and the Dow Jones Industrial Average jumped 7.9%—marking the biggest single-day rise since the 2008 global financial crisis.
Trump’s announcement, made via social media, stunned markets: “I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately,” he wrote.
The rally was swift and broad-based, with market favorites like Nvidia Corp. leaping 18.03%, Tesla Inc. gaining 22.69%, and Advanced Micro Devices soaring 23.82%. Delta Air Lines Inc. posted the biggest gain among them, rising 23.38%.
Nearly 30 billion shares changed hands — marking the busiest trading day in recent history. The S&P 500 also saw its biggest intraday reversal since November 2008, rebounding nearly 11% from its lows. Despite the bullish response, the tariff reprieve notably excludes China. Earlier in the day, China retaliated against US measures by imposing an 84% levy on American imports. In response, the US hiked Chinese tariffs to a staggering 125%.
The partial tariff pullback triggered a scramble among hedge funds and short sellers, many of whom had built large bearish positions in anticipation of further economic strain. “We currently have aggressive covering among hedge funds and long only buying in tech that is ramping with each leg higher in the market,” noted John Flood, a Partner at Goldman Sachs Group Inc. In fact, Goldman’s basket of the most-shorted stocks outpaced the broader market, spiking 17.34% compared to the S&P 500’s 9.5% climb.
JPMorgan Chase & Co. had warned on Tuesday that a market rebound could force rapid covering of shorts. The rally’s momentum was further amplified by automated strategies: “Levered ETFs mechanically adding long equity exposure supercharged the rally,” said Daniel Kirsch, Head of Options at Piper Sandler & Co. He added that traders also unwound downside hedges, pushing the markets even higher.
Wall Street’s fear gauge, the Cboe Volatility Index (VIX), fell sharply from 50 to 35—underscoring the dramatic mood shift among investors. Whether this rally marks a sustainable recovery or a temporary euphoria remains to be seen, especially as geopolitical tensions with China continue to simmer.
