The US stock market saw an increase on Tuesday, though it moderated from its high levels by late morning trading, with investors considering the potential impact of US-Japan tariff discussions and expectations for other trade agreements.

The S&P 500 index rose by more than 2%, the Nasdaq Composite by approximately 2.4%, and the Dow Jones Industrial Average by around 2%, gaining nearly 850 points. Initially, the Dow had surged by more than 1,300 points earlier in the day.

Investors showed renewed interest in buying following sudden tariff-related actions from President Trump which led to a turbulent trading day on Monday, resulting in the Dow dropping 350 points and the S&P 500 marking a historic three-day decline.

Market sentiment received a boost upon Treasury Secretary Scott Bessent's announcement of trade talks initiation with Japan, dispelling concerns that the White House may not be willing to negotiate on tariffs, as hinted by trade advisor Peter Navarro's remarks to the Financial Times.

In Tokyo, the Nikkei 225 index closed 6% higher, recovering from a significant Monday drop to its lowest level in more than 18 months as investors responded positively to signs of US flexibility.

Despite these positive developments, the looming threat of a trade war between the US and China remains a concern for global markets. China declared its readiness to retaliate if the US persists with what it considers coercive tactics, with President Trump threatening an additional 50% tariff on Chinese goods starting Wednesday if China proceeds with its retaliatory tariff plans.

On Wall Street, influential figures such as JPMorgan CEO Jamie Dimon, BlackRock CEO Larry Fink, and Tesla CEO Elon Musk, who is also a Trump advisor, have expressed apprehensions about the potential consequences of the tariffs imposed by the Trump administration.