(Reuters) -U.S. stock index futures leapt on Wednesday, after President Donald Trump backed off from his threats to fire the head of the Federal Reserve and raised hopes for a trade deal with China.
Shares of Tesla, meanwhile, rose 6.3% in premarket trading as the EV maker kicked off Magnificent Seven earnings on a positive note.
The company reported a profit for its core auto business that topped rock-bottom expectations, while CEO Elon Musk said he would step back from his involvement in the Trump administration to focus on running his many companies.
Trump said on Tuesday he had “no intention” of firing Fed Chair Jerome Powell, walking back from his comments that Powell’s termination could not come “fast enough” after heavy criticism in the past few days.
Hopes for trade negotiations between the U.S. and China, which have been locked in an escalating tit-for-tat tariff war, also helped lift sentiment after Trump expressed optimism that a trade deal with the country could “substantially” lower tariffs on Chinese goods.
Markets welcomed Trump’s change in tone, with futures jumping in extended trade on Tuesday and recovering after the attacks on Fed’s Powell had rattled investors and sparked sharp losses in U.S. assets, including stocks and the dollar, earlier in the week.
At 5:10 a.m. ET, Dow E-minis were up 675 points, or 1.72%, S&P 500 E-minis were up 115 points, or 2.16% and Nasdaq 100 E-minis were up 460.25 points, or 2.5%.
Megacap tech stocks rose broadly, with Apple up 3% and Nvidia gaining 4.8%. Alphabet, which will report quarterly results on Thursday, gained 2.2%.
Although Trump backtracked on his statement to fire Powell, he reiterated that he wanted the Fed to be more active in lowering interest rates.
Powell said last week that the central bank will be cautious in easing policy given the lack of clarity on how sweeping changes to U.S. trade rules will impact growth and inflation.
Markets lifted bets that the Fed would keep rates on hold at its next meeting, seeing a 93.2% chance of no change in policy as per CME’s FedWatch.
Investors also continue to monitor quarterly company results for more clues on the impact of tariffs on earnings and consumer behavior. Earnings from Boeing and Boston Scientific are due before the bell.
The year-over-year blended earnings growth estimate for the S&P 500 is 8.1%, as per LSEG data on Tuesday.
S&P Global PMI surveys on the day will be watched to see how tariffs are impacting businesses, while four Fed speakers are also on deck.
Shares of Intel, meanwhile, rose 3% after a report the chipmaker was set to cut over 20% of its workforce.
(Reporting by Lisa Pauline Mattackal; Editing by Shinjini Ganguli)
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