(Reuters) – Wall Street’s main indexes rallied on Wednesday, with the S&P 500 touching a two-week high on hopes of a de-escalation in the U.S.-China trade war and as President Donald Trump scaled back his threats to fire Federal Reserve Chair Jerome Powell.

The Trump administration would look at lowering tariffs on imported Chinese goods pending talks with Beijing, Reuters reported. That followed a Wall Street Journal report citing a senior White House official as saying that U.S. tariffs on China were likely to come down to between roughly 50% and 60%.

Trump said on Tuesday that a trade deal with China could “substantially” cut tariffs. The prospect of negotiations between Washington and Beijing, currently locked in an escalating tit-for-tat tariff war, lifted market sentiment.

Stocks extended gains after the WSJ report, building on early momentum after Trump said he had “no intention” of firing Powell, walking back on his comment that the Fed chair’s termination could not come “fast enough.”

Trump Criticism of Powell Fueled Concerns

Trump’s criticism of Powell had fueled concerns about the central bank’s autonomy, leading to sharp losses in U.S. assets, including stocks and the dollar, earlier in the week.

“There seems to be some light at the end of the tunnel here in terms of the trade war, investors are beginning to feel more confident that perhaps the worst of the trade rhetoric is over and are beginning to focus on some of the fundamentals, like the earnings,” said Peter Cardillo, chief market economist at Spartan Capital Securities.

Among key earnings, Tesla leapt nearly 8%. The EV-maker reported better-than-expected profit for its core auto business. CEO Elon Musk said he would step back from his involvement in the Trump administration to focus on running his numerous companies.

At 10:45 a.m. ET, the Dow Jones Industrial Average rose 1,082.18 points, or 2.76%, to 40,269.16, the S&P 500 gained 172.17 points, or 3.26%, to 5,459.49, and the Nasdaq Composite gained 691.40 points, or 4.24%, to 16,991.82.

The consumer discretionary and information technology stocks led broad-based gains, up 5.2% and 4.6% respectively, helping the tech-heavy Nasdaq largely outperform peers.

The Philadelphia SE Semiconductor index leapt 5.6%, while the small-cap Russell 2000 rose 3.5%.

The CBOE Volatility Index, Wall Street’s fear gauge, touched its lowest since April 3.

Softening of China Tariffs

The apparent softening on China tariffs was a welcome sign for markets battered by Trump’s erratic trade policies. The S&P 500 has dropped more than 11% from its February record high. However, it jumped nearly 6% over the last two sessions.

However, given the continued uncertainty, some market participants remain skeptical of the recent rally.

“Unless the president or the administration comes out with consistent statements – and by consistent, I mean by more than (a) 24-hour news cycle – this is a temporary rally,” said Peter Andersen, founder, Andersen Capital Management.

Boeing gained 7.2% after reporting a smaller-than-expected quarterly loss.

Meanwhile, data showed U.S. business activity slowed to a 16-month low in April.

Advancing issues outnumbered decliners by a 8.56-to-1 ratio on the NYSE, and by a 5.92-to-1 ratio on the Nasdaq.

The S&P 500 posted two new 52-week highs and two new lows, while the Nasdaq Composite recorded 31 new highs and 19 new lows.

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(Reporting by Lisa Pauline Mattackal, Purvi Agarwal and Sukriti Gupta in Bengaluru; Editing by Shinjini Ganguli and Pooja Desai)