Stocks staged a remarkable recovery Wednesday after President Trump abruptly cut back his planned higher universal tariffs to 10 percent for 90 days for countries excluding China. The Dow Jones industrial average rallied 7.9 percent, the S&P 500 gained 9.5 percent, and the Nasdaq was up an incredible 12.2 percent. US bond yields ended higher but way down from the day's highs. The dollar was mixed though notably better than earlier versus safe-haven currencies including the yen and Swiss franc that had been bid up on a flight from dollar assets. Oil prices rallied after rebounding from earlier weakness on the tariff news.

Trump raised China's tariff penalty to 125 percent as punishment for retaliating against the US tariffs, but his reversal on tariffs for pretty much everyone else set off an extraordinary rebound in stocks, commodities and risk assets in general. The surge in risk assets also removed some selling pressure from the US Treasury market, which had suffered huge losses as investors appeared to be shunning all US assets in the big risk off move which continued until Trump's stunning shift on tariffs. Bonds also got a lift from a surprisingly successful Treasury 10-year note auction, which reassured the market that global investors were not so averse to Treasuries after all. Despite the improvement, bond yields remained higher on the day as investors scaled back expectations for aggressive near-term Federal Reserve rate cuts which had been inspired by recession fears flowing from Trump's tariff policy.

Some investors remain skeptical that Trump's tariff pause will stick and noted that in the past, Trump has paused tariffs only to bring them back later. Trump claimed his reversal reflected a victory for his trade policy as countries beat a path to the White House seeking concessions. Skeptics point out that there are no negotiations involving the EU or China, among the biggest players. Others appeared more upbeat. Goldman Sachs was among analysts scaling back its risk of recession after Trump's latest tariff twist.

Among sectors, big technology stocks and big banks led the winners, as did airlines and cruise lines which have been beaten up badly on recession fears.

Market Reflections track market reaction to the trading day's major events. Economic data, policymaker speeches, and company news are featured in this report as well as key indexes and financial instruments.

Understanding why markets respond as they do is fundamental for an investor. Market Reflections help explain how the day's events, news, and data impact the outlook for the economy and for market prices.