NEW YORK — In a dramatic turn of events, U.S. stocks soared on Wednesday, fueled by a global market rally following President Donald Trump's unexpected softening of his trade war rhetoric and criticism of the Federal Reserve.

The S&P 500 jumped a significant 1.7%, building on a prior day’s gains that had wiped out a steep Monday loss. Meanwhile, the Dow Jones Industrial Average surged 419 points, or 1.1%, and the Nasdaq composite experienced an impressive 2.5% increase.

But why the sudden shift? Analysts say it stems from Trump’s recent comments expressing "no intention" to dismiss Jerome Powell, the head of the Federal Reserve, whom Trump previously labeled a "major loser" for not cutting interest rates aggressively.

Trump’s tense relationship with the Fed had rattled investor confidence, as their independence is crucial for making sound decisions that ensure long-term economic health, even if short-term pain is required. The fear was that Trump’s posture could pressure the Fed into unfavorable policy decisions.

In addition to discussing the Fed, Trump hinted at the possibility of substantially lowering tariffs on Chinese imports, currently pegged at an eye-watering 145%. "It won’t be that high, not going to be that high," he assured, fueling optimism on Wall Street that trade agreements could be reached.

U.S. Treasury Secretary Scott Bessent echoed this sentiment, suggesting that a major deal with China could be on the horizon, further bolstering investor hope that a recession might be averted.

However, the trade war's impact is already being felt. A recent report revealed that U.S. business activity hit a 16-month low, as rising prices due to tariffs strain companies. Additionally, market analysts expect continued volatility, driven largely by Trump’s unpredictable approach to tariffs and trade.

As for the stock market's performance, Big Tech stocks played a significant role in driving indexes higher. Nvidia rebounded by 3.9% as investors absorbed the implications of U.S. export restrictions on its business. The AI sector thrived as well, with Vertiv Holdings skyrocketing 8.5% after reporting better-than-expected earnings.

Tesla also surged 5.4% after CEO Elon Musk vowed to focus more on running the company amidst reported profit declines, illustrating the market's response to leadership changes and strategic pivots in major firms.

In total, the S&P 500 climbed 88.10 points to finish at 5,375.86. The Dow Jones Industrial Average surged 419.59 points to close at 39,606.57, while the Nasdaq composite gained 407.63 points, ending at 16,708.05.

Globally, stocks reflected this bullish sentiment, with France’s index soaring 2.1%, Hong Kong's climbing 2.4%, and Japan rising 1.9%. Only Shanghai saw a dip, down 0.1%, highlighting the uneven recovery amidst ongoing trade tensions.