Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
President Trump's decision to delay a 50% tariff on goods from the European Union led to a Wall Street rally on Tuesday, with the major indexes closing higher.
The S&P 500 climbed 119 points, or 2.1%, to close at 5,922 points, while the Dow Jones Industrial Average gained 741 points, or 1.8%, to close at 42,344. The tech-heavy Nasdaq Composite rose 2.5%.
Mr. Trump had initially threatened to impose a "straight 50% Tariff" on the trading bloc, effective June 1. The news, announced by the president in a Truth Social post Friday, sent stocks tumbling as investors braced for more uncertainty.
But investors viewed the markets with more enthusiasm on Tuesday following an announcement from Mr. Trump over the holiday weekend that he would delay the implementation of EU tariffs, from June 1 to July 9.
Analysts noted that the stop-and-go nature of the president's tariff policies have been a key driver of market volatility in recent weeks, with stock movements hinging upon news of potential trade deals. All the while, experts say that the president's moves could be part of his overall strategy to broker new deals.
"With the Europe tariff threat removed, at least for now, markets got more evidence that tariffs are largely a negotiation tool," said Jeff Buchbinder, chief equity strategist for LPL Financial, in an email to CBS MoneyWatch.
The administration has been working to strike trade agreements before July 9, when the 90-day pause on reciprocal tariffs is set to end. The president announced broad terms of a trade deal with with the United Kingdom earlier this month, followed by a tariff truce with China.
Maros Sefcovic, chief trade negotiator for the EU, said Monday, following calls with top U.S. officials, that the bloc was "fully committed" to reaching an agreement with the U.S. by the July deadline.
European stocks were also up amid news of the U.S.-EU trade talk progress, while Asian indexes were mixed.
A partial rebound in consumer confidence added to Tuesday's positivity. The Conference Board's Consumer Confidence Index, released Tuesday morning, found consumer confidence rose 12.3 points to reach 98.0, up from 85.7 in April. The upswing follows month of decline in the index, triggered by fears of inflation and tariff-induced economic uncertainty. Analysts, however, warned the positive turnaround may be short-lived.
"Consumer confidence in May rebounded after trade tensions eased, but this may only be temporary," said Jeffrey Roach, chief economist for LPL Financial, in a research note.
The bond market remained steady after easing slightly on Friday, after concerns earlier in the week over the nation's debt led to an uptick in Treasury Yields. Yields on the 10-Year Treasury were at 4.5% as of Tuesday afternoon.
Still, this moment of calm may also be temporary, some economists say. In a research note on Tuesday, UBS analysts said investors should brace for more volatility in the bond market, as Mr. Trump's budget bill still awaits approval from the Senate.