China vowed to "fight to the end," with investors facing the growing possibility that a trade war between the world's two biggest economies was set to spiral.

After initially soaring on optimism around trade negotiations with Japan, the market tanked again , erasing a 4% gain to push the S&P 500 down 2.19% by the closing bell.

Wednesday

By the middle of the week, the bond market was adding to the chaos.

While major stock indexes continued their slide, long-dated Treasury yields started to spike, an unusual occurrence when uncertainty is high and people are worried about a recession.

The 10-year Treasury yield jumped as high as 4.5%. When yields rise, bond prices fall, indicating that traders were dumping US debt.

The sudden spike in yields—which is the opposite of what Trump and his team have said they want— was enough to get the president's attention .

With yields up, Trump announced a 90-day pause on reciprocal tariffs, though he raised China's tariff rate and kept a baseline 10% duty on most imports.

The market's relief was immediate.

Within minutes, the S&P 500 was up 7%, and it went on to rise 10% for the day, its best gain since 2008. That was trumped by the Nasdaq, which saw its biggest single-day rise since 2001. The Dow, meanwhile, gained almost 3,000 points.

Thursday

After the frenzy, commentators noted that it was the bond market that ultimately pushed Trump to pause the tariffs. The president and his team even said as much, telling reporters that they were watching the yields.

The bond vigilantes had seemingly won

Unfortunately for investors, reality set in once Thursday's trading session kicked off, with China's huge tariff rate in focus and more questions than answers amid the pause in the trade war.

"Now we have potentially 90 more days of uncertainty, and that's just going to potentially cause less business capital expenditures, less hiring plans, maybe even moderate consumer spending," Eric Sterner, chief investment officer for Apollon Wealth Management, told BI.

Indexes dropped sharply again, at one point giving back most of the gains from Wednesday's session as the White House clarified China's tariff rate was actually 145%.

The S&P finished 3.5% lower for the day, the Dow lost 1,000 points, and the Nasdaq shed 4%.

Meanwhile, the US dollar accelerated its plunge, suggesting that US exceptionalism was waning amid the bout of confidence-shattering volatility. Even as some analysts rescinded their recessionary outlooks , bond yields weren't budging much.

"I still think the US hasn't lost its status as to safe haven, whether it's the US, dollar or Treasurys, but it is concerning, and I think the more combative we become with the rest of the world, the less reliant they're going to be," Sterner said.

Friday

By the end of the week, investors were feeling the fatigue.

"I'm not enjoying this week. I tell you what, there were a couple of nights covering I was up until about three," Moya said.

The week wound down with a fresh rise in Treasury yields, but yet again, investors changed course, with the S&P 500—improbably—on track for its best week since 2023 as traders headed toward the close.

Optimistic signals from the White House about a deal with China served as an adrenaline boost for investors, though it did nothing to slow the bond market sell-off.

What happens beyond this week is a big question, and whether the stock market finds a bottom to rally from or if the trade war volatility continues.

"I just wasn't expecting, like many people, that this tariff fatigue would last so long. But that's where we are," Sterner said.

"There's a lot of historic moves. It's difficult to quantify," Moya added. "And it seems that we're waiting for the next tweet, the next Truth Social post, to determine what is going to be the noise and is it something that could really derail or provide some relief?"

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