Dow Nears 40,000 as Trade Hopes and Fed Rate Cut Bets Fuel Rally

The Dow Jones Industrial Average (DJIA) surged 0.62%, inching closer to the 40,000 milestone, as investors embraced a wave of optimism driven by prospects of a Federal Reserve interest rate cut in June and signs of easing US-China trade tensions. The rally, which saw the Dow rebound from a daily low of 39,200 to a high of 40,002, was fueled by a shift toward risk-on sentiment, despite mixed signals from US economic data. The market’s upbeat mood reflected growing confidence that the Fed might pivot to counter recession fears, while President Donald Trump’s softer stance on China trade talks sparked hopes of a potential deal.

Trump’s comments about possibly reducing tariffs on Chinese goods signaled a willingness to negotiate, lifting Wall Street’s spirits. However, US Treasury Secretary Scott Bessent tempered expectations, clarifying that no unilateral tariff cuts were on the table. Meanwhile, China’s Ministry of Commerce spokesperson He Yadong dismissed reports of active trade talks, urging the US to scrap its “unilateral” tariffs. Despite this pushback, the mere hint of a thaw in US-China relations was enough to propel the Dow, with investors betting on de-escalation to stabilize global markets.

US economic indicators also played a role in shaping market dynamics. A jobs report that met expectations and a sharp rise in Durable Goods Orders for March, driven by aircraft bookings, bolstered confidence in economic resilience. Yet, gold prices defied the risk-on rally, climbing above $3,300, up 1%, as falling US Treasury yields—the 10-year T-note dropping to 4.309%—provided support. The precious metal’s strength highlighted lingering investor caution amid trade uncertainties and inflationary pressures.

Looking ahead, the Dow’s trajectory remains uncertain but promising. While the index’s long-term downtrend persists, buyer momentum is building. A break above 40,500 could set the stage for a test of last week’s high at 40,790, with 41,000 as the next key resistance. However, if sellers regain control and push the Dow below April 23’s low of 39,486, the index could retreat to April 22’s high of 39,271, closing the recent gap. As traders weigh Fed policy shifts and US-China trade developments, the Dow’s flirtation with 40,000 underscores a market caught between cautious optimism and looming resistance.