US stocks were higher on Tuesday, trimming losses from the prior session as investors cautiously reassessed risks to the Federal Reserve’s independence and the increasingly murky trajectory of economic policy under the Trump administration. The S&P 500, the Nasdaq 100, and the Dow Jones Industrial Average all gained slightly more than 1%, staging a modest recovery after a turbulent start to the week that had rattled financial markets.
US stocks rebound on Tuesday
Monday’s sharp selloff had been fueled by a combination of factors, including concerns over political interference with the Federal Reserve and the potential for a deepening global trade war. President Trump and several senior cabinet members openly discussed pressuring Fed Chair Jerome Powell to lower interest rates, and even floated the possibility of replacing him — actions that could erode one of the cornerstones of US economic credibility: an independent central bank. This amplified investor unease, leading to significant outflows from US dollar assets, a steep drop in Treasury bond prices, and broad weakness across US equities.
Tuesday’s rebound reflected some bargain hunting and technical support, although underlying market sentiment remained fragile. Investors continued to wrestle with the idea that the era of “US exceptionalism” — a period during which American stocks consistently outperformed their global counterparts — could be facing a serious test. The twin threats of trade protectionism and political encroachment on monetary policy have raised questions about the sustainability of US asset dominance in a more fragmented and volatile global landscape.
Who's leading the gains
Among individual movers, General Electric surged 4.5% after reporting stronger-than-expected earnings before the opening bell, suggesting that its turnaround efforts may be gaining traction despite a challenging macro backdrop. In contrast, Verizon slipped 1% following a cautious revenue outlook. Tesla shares rebounded 2% ahead of the company's much-anticipated earnings release after the close, clawing back a portion of Monday’s steep 6% loss amid heightened scrutiny over its margins and delivery figures.
Meanwhile, traders kept a close eye on bond markets, where yields remained elevated on the back of increased uncertainty. Defensive sectors such as utilities and consumer staples underperformed, while technology and industrials led the recovery effort, reflecting tentative optimism that earnings resilience could help cushion the broader economy from external shocks.
Volatility is likely to persist
Still, many analysts warned that volatility was likely to persist, especially with critical catalysts looming, including upcoming GDP data, further Fed communications, and any developments on the US-China trade front. With trust in US policy stability under pressure and global growth indicators flashing warning signs, investors appeared increasingly inclined to adopt a more cautious, risk-sensitive stance.
