US equities advanced on Wednesday as trade tensions between the United States and China showed signs of easing. The S&P 500 rose by 1.1% by late morning in New York. The NASDAQ 100 climbed 1.4%, and the Dow Jones Industrial Average increased by 0.7%. Investors responded positively to comments by Treasury Secretary Scott Bessent, who suggested a possible delay in tariffs if China postponed restrictions on rare earth exports.
Banking stocks contributed to the rally. Morgan Stanley and Bank of America Corp. reported stronger-than-expected third-quarter earnings. Morgan Stanley’s trading revenue rose 35% to $4.12 billion, outpacing Goldman Sachs and delivering its best third-quarter performance to date. Investment-banking fees also rose 44%. Bank of America’s earnings exceeded analyst projections, driven by gains in investment banking and net interest income.
The Philadelphia Semiconductor Index gained 3.2% following upbeat demand commentary from ASML Holding NV. ASML reported robust demand for its AI-powered chip production devices, which contributed to an increase in semiconductor stocks. At the same time, the Russell 2000 Index and the Bloomberg Magnificent 7 Total Return Index gained by 1.4% each.
Bond yields dropped as investors sought safety amid ongoing trade uncertainty. The yield on 10-year US Treasuries decreased by two basis points to 4.01%. The 30-year Treasury yield also slipped, falling to 4.60%.
Germany’s 10-year yield dropped five basis points to 2.57%, while the UK’s equivalent declined by six basis points to 4.53%. The two-year US yield remained essentially unchanged at 3.49%.
The Bloomberg Dollar Spot Index weakened by 0.2% as the euro and British pound gained. The euro edged up to $1.1624, and the pound rose to $1.3365. The Japanese yen appreciated 0.3%, reaching 151.40 per dollar.
Gold increased by 1.3%, with gold prices at $4,200 an ounce, on a surge in demand for safe-haven commodities. Market volatility continued with conflicting signals on trade negotiations, as President Trump mentioned the possibility of suspending imports of Chinese cooking oil.
The earnings season has strengthened the belief in the power of Corporate America. Morgan Stanley reported better-than-expected results in its trading, banking, and wealth management operations. The company recorded total revenue of $18.2 billion, compared to the forecasted $16.6 billion by analysts.
Retail investor confidence was still high, with call options being bought more than the number of puts in 24 consecutive weeks, as per Citadel Securities. This action is a sign of continued optimism regarding the resilience of the equity market.
Additionally, HSBC upgraded NVIDIA's (NVDA) stock rating to "Buy" from "Hold," based on its promising growth potential in AI. Apple Inc. is also planning to increase its manufacturing capacity in Vietnam and build more products ahead of the holiday season.
The optimistic market trend came after one of the best six-month performances of equities since the 1950s. Analysts indicate that, despite existing short-term risks, investor interest in risk assets remains, driven by positive earnings and controlled trade risks.