US Stocks Rise as Dip Buyers Return Despite Trade War Fears

Wall Street rode another volatile wave on Wednesday, swinging between gains and losses as traders weighed renewed US-China trade tensions against strong corporate earnings and rate-cut optimism from the Federal Reserve.

Market Snapshot

• S&P 500 (.SPX.US): +0.4%, recovered from intraday lows

• Nasdaq Composite (.IXIC.US): +0.7%, lifted by chipmakers and tech giants

• Dow Jones (.DJI.US): +0.3%, supported by bank earnings

• US 2-Year Treasury Yield: near 2022 lows

• Gold Futures: surged above US$4,200/oz, hitting a new record

Volatility Returns as Trade Tensions Flare

After one of the best six-month stretches since the 1950s, Wall Street is showing signs of fatigue — but buyers continue to step in at every dip.

The S&P 500 swung more than 1.5% intraday before ending higher, underscoring investors’ buy-the-dip mentality amid speculation that Fed rate cuts will extend the bull market into 2026.

“Investors buying the dip are still driving the action, keeping sentiment firm even as indicators show strain,” said Mark Hackett of Nationwide.

Despite strong momentum, fears of a full-blown US-China trade war resurfaced after President Donald Trumpreaffirmed his 100% tariff stance on Chinese goods. Treasury Secretary Scott Bessent hinted at a possible tariff pause if Beijing delays new restrictions on rare earth exports.

Markets are also watching for a potential Trump–Xi meeting later this month, which could determine whether trade tensions cool or escalate further.

Earnings Season Provides Support

Corporate results have helped offset macro jitters:

• Morgan Stanley (MS.US) and Bank of America (BAC.US) surged after solid Q3 earnings.

• ASML (ASML.US) jumped on strong AI-related demand, boosting chipmakers.

• United Airlines (UAL.US) rallied in after-hours trading with better-than-expected results.

“The third-quarter earnings season should support the view that the bull market remains intact,” said David Lefkowitz at UBS Global Wealth Management.

Fed Comments Reinforce Rate-Cut Expectations

Fed governor Stephen Miran said the latest escalation in trade tensions adds “new downside risks” to growth, making it “more important for officials to lower rates quickly.”

Markets now price in two potential rate cuts by year-end, with a higher chance of a 25bp move in both October and December meetings.

Investor Sentiment Still Strong

According to Citadel Securities, retail traders have favored call options over puts for 24 consecutive weeks, matching the record streak last seen in 2023.

“Retail conviction remains extraordinary,” noted Citadel’s Scott Rubner.

Craig Johnson at Piper Sandler echoed this optimism:

“A consolidation phase is likely as investors focus on earnings, but the ‘buy-the-dip’ playbook remains intact as we enter the fourth year of this bull market.”

Analyst Takeaways

• HSBC’s Max Kettner remains risk-on, expecting US growth forecasts to stay beatable.

• Bankrate’s Stephen Kates says forward guidance will be key for Q4 sentiment.

• CFRA’s Sam Stovall notes potential short-term consolidation but adds that “no early-year correction exceeding 10% has been followed by another in the same year since WWII.”

Moomoo Insights: What to Watch Next

• Trade Headlines: Any updates on US-China tariff talks or rare earth negotiations

• Fed Signals: October FOMC meeting guidance on rate path

• Earnings Continuation: Key reports from Tesla, Netflix, and Procter & Gamble

• Gold & Dollar Dynamics: Safe-haven flows amid rising geopolitical uncertainty