BOSTON/LONDON (Reuters) – Most stocks and the dollar ticked up on Thursday as traders took some heart from trade talks between the U.S. and Japan, though the positive mood was curbed by Federal Reserve Chair Jerome Powell saying the Fed would be cautious about cutting interest rates.

With a holiday weekend ahead, investors were reluctant to double down on the broad-based decline in risk assets this week, with gold pulling back slightly from a record high set on Wednesday.

U.S. President Donald Trump unexpectedly joined talks in Washington on Wednesday with a delegation from Japan, saying later that “big progress” had been made in the discussions with lead Japanese negotiator Ryosei Akazawa. Trump gave no details, but it did give some support to those investors betting that some of the tariff impact will be negotiated away in time.

The S&P 500 rose 0.18%, to 5,285.22 and the Nasdaq Composite edged up 0.07%, to 16,318.70. Technology shares got a boost from forecast-busting earnings from Taiwan’s TSMC, contrasting with earlier warnings from bellwethers Nvidia and ASML. The recovery came after Wednesday’s selloff that pushed the S&P 500 down 2.2% and the Nasdaq down more than 3%.

The Dow Jones Industrial Average fell 1.32%, to 39,147.05, dragged down by UnitedHealth <UNH.N>. The healthcare insurance giant surprised investors with a quarterly earnings miss and a lower outlook for the full year due to higher-than-expected medical costs, sparking an 18% selloff in shares that reverberated across the sector.

The European Central Bank, also grappling with the tariff uncertainty, cut rates by 25 basis points as expected.

The bank said the uncertainty was likely to reduce confidence among households and companies, and the volatile market response would have a tightening effect on monetary conditions.

Kirstine Kundby-Mielsen, FX analyst at Danske Bank, said the ECB’s statement had a dovish tone due to the trade uncertainty.

“(Their) focus has shifted to looking at the downside risk to the growth outlook, rather than upside risk to inflation.”

The STOXX 600 was 0.2% lower after the decision but was still headed for a gain this week, while the euro, which is not far off three-year highs against the dollar, was 0.3% lower on the day at $1.1365.

Fed in Focus

Central banks were also near the top of the agenda in the U.S. after Fed Chair Powell said on Wednesday that the Fed would wait for more data on where the economy was headed before making any changes to interest rates.

But he also said Trump’s tariff policies risked pushing inflation and employment further from the central bank’s goals.

The benchmark U.S. 10-year Treasury yield was calm, up less than 1 basis points at 4.286%, well off the 4.59% touched last week during the height of market panic. [US/]

“As the dust is starting to settle, there are concerns regarding that stagflationary outlook that Powell warned about,” City Index strategist Fiona Cincotta said.

Trump’s comments on Thursday that Powell’s termination “cannot come fast enough”, while calling for the U.S. central bank to cut interest rates, added to uncertainty about the U.S. economy.

Christopher Hodge, chief economist for the U.S. at Natixis in New York, said he still thinks Powell will be retained until his term ends but is “less certain” on the point than before; markets would react poorly if the Fed’s independence was compromised. “The bottom line is the parameters of potential policy outcomes has widened,” Hodge said.

The dollar has been a major casualty of the turmoil stemming from tariffs and their impact on economic growth. Investors have ditched U.S. stocks and bonds in the last couple of weeks.

Against a basket of six other currencies, the dollar has fallen to its lowest in three years this month, but it was a touch firmer on Thursday.

The dollar was last up 0.2% on the Japanese yen at 142.17 and 0.5% on the Swiss franc at 0.817, both safe havens having benefited from the turbulence.

That was a sharp turnaround for the yen, which touched a seven-month high earlier in the session, before reversing after Akazawa said foreign exchange had not been discussed at the trade talks in Washington.

In commodities, gold came off record highs, down 0.5% at $3,327 per ounce as safe-haven flows and an exodus from the dollar took a pause.

Oil prices rose on the prospect of tighter supply, leaving Brent crude futures up 1.1% at $66.6 a barrel.

—

(Additional reporting by Saeed Azhar in New York, and Alun John and Samuel Indyk in London, Ankur Banerjee in Singapore and Purvi Agarwal in Bengaluru; Editing by Jacqueline Wong, Helen Popper and Toby Chopra)