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U.S. stocks opened higher Tuesday after a brutal start to the week, even as investors remain rattled by a barrage of conflicting signals on recession risks — and by President Donald Trump’s escalating pressure campaign against the Federal Reserve.
The Dow Jones Industrial Average rose 603 points in Tuesday morning trading, or 1.6%, while the S&P 500 added 1.5% and the tech-heavy Nasdaq jumped 1.8%.
The VIX, Wall Street’s fear gauge, dropped more than 6%, signaling a cooldown in volatility. Gold continued its climb, up 0.7% to $3,449, while small-cap stocks lagged, with the Russell 2000 falling more than 2%.
The International Monetary Fund has downgraded its global economic growth forecast for 2025 to 2.8%, a decrease from the previous estimate of 3.3%, citing the impact of widespread tariffs and escalating trade tensions under President Donald Trump’s administration.
The U.S. economy is now projected to grow at 1.8%, down from 2.7%, with the IMF raising the probability of a U.S. recession this year to 37%, up from 25%. The IMF attributes the slowdown to increased uncertainty, reduced investment, and tighter credit conditions resulting from the tariffs, which affect nearly 60 countries.
Gold breaks $3,500 as fear and inflation collide
Gold extended its historic rally overnight, climbing above $3,500 for the first time. The surge likely reflects a dual concern: Investors are chasing safety amid political and market chaos, while bracing for a potential resurgence in inflation fueled by Trump’s tariffs.
Last week, investors poured $8 billion into gold funds — double the peak weekly inflows seen during the pandemic — pushing the four-week average to $4 billion, according to Bank of America Global Research (BAC). Meanwhile, traders on Kalshi, a CFTC-regulated prediction market, continue to price in elevated odds of a U.S. recession by the end of 2025.
Dollar drops, and so does clarity
Also on Monday, the U.S. dollar plunged to a three-year low after Trump ramped up attacks on Fed Chair Jerome Powell, intensifying calls for interest rate cuts and deepening fears over the central bank’s independence.
“The market no longer knows what to believe,” wrote The Kobeissi Letter, pointing to a swirl of conflicting cues: gold rising like cuts are coming, stocks falling like a recession is near, and Treasury yields climbing like the economy is booming.
Tesla under pressure ahead of results
Tesla (TSLA) reports earnings after the bell on Tuesday, with Wall Street bracing for more bad news. Wells Fargo (WFC) expects a Q1 miss, citing weak deliveries, shrinking margins, and fading enthusiasm for the Cybertruck.
The firm also slashed its 2025 outlook by 16%, pointing to soft demand for the refreshed Model Y and mounting doubts around speculative bets like the Cybercab and Optimus.
Tesla stock rose more than 3% in Tuesday morning trading after slumping on Monday. The shares are down about 38% so far this year.
Shares of Google (GOOGL) parent Alphabet also dropped more than 2% on Monday after the Justice Department asked a federal judge to break up the company, possibly by forcing it to sell off its Chrome browser. Google stock rebounded about 1% on Tuesday morning.
The wider market rout on Monday saw the Dow tumble almost 1,000 points, or 2.5%, while the S&P 500 dropped 2.4% and the Nasdaq fell 2.6%. The VIX spiked as much as 14% intraday before closing Monday almost 9% higher — a sign that while peak panic cooled, market anxiety remains the order of the day.
Earnings to offer clues on pharma, telecom, defense
Beyond Tesla, a wave of major earnings Tuesday will offer a broader pulse check on the industrial and healthcare sectors.
Results from Intuitive Surgical (ISRG), Danaher (DHR), and Novartis (NVS) will provide fresh reads on medical tech and pharma trends. SAP (SAP) and Verizon (VZ) add visibility into enterprise tech and telecom, while Chubb’s (CB) results could shed light on how insurers are navigating a climate of rising risk and uncertainty.
Defense is also in focus in a big way on Tuesday, with Lockheed Martin (LMT), Northrop Grumman (NOC), and RTX (RTX) (formerly Raytheon Technologies) all reporting earings — offering investors a rare, same-day snapshot of the U.S. military-industrial complex. Together, the three giants cover everything from missile systems to fighter jet engines to battlefield surveillance, making their earnings a bellwether for how rising global tensions and Pentagon budgets are filtering into the sector.
Sector pain spreads to energy and insurance
Health insurance stocks extended steep losses on Monday after UnitedHealth (UNH) slashed its 2025 forecast, warning of higher-than-expected medical costs across its Medicare Advantage plans.
Energy stocks also dropped, dragged down by falling oil prices and growing concerns that a protracted trade war could undercut global demand.