(Reuters) – U.S. stocks rallied on Tuesday, with the S&P 500 on track to erase losses from a two-day selloff, after Federal Reserve Chair Jerome Powell said the central bank would act “as appropriate” to trade war risks, leaving the door open for a possible rate cut.

A day after St. Louis Fed chief James Bullard said a rate cut may be warranted soon, Powell said the Fed was “closely monitoring the implications” of a trade dispute that has disrupted global markets and posed risks to growth.

Wall Street’s main indexes have shed more than 6% in May on fears of a recession as trade tensions between the United States and China show little signs of easing.

“Investors are taking comfort in what appears to be a Fed that is contemplating on cutting rates if the economy materially slows down,” said Michael Geraghty, equity strategist at Cornerstone Capital Group in New York City.

Also helping sentiment was a Washington Post report that Republican lawmakers were discussing whether they may have to vote to block President Trump’s planned new tariffs on Mexico.

Earlier in the day, China’s commerce ministry said the differences and frictions with Washington should be resolved through dialogue.

“The worries of trade tensions escalating have come down a little bit with the recent rhetoric out there and we’re seeing a bounce off of an over sold condition,” said Eric Marshall, a portfolio manager at Hodges Capital Management in Dallas.

The technology sector rose 2.41%, as shares of marquee companies – Amazon.com, Apple Inc, and Google-parent Alphabet Inc – rebounded from Monday’s selloff, which was triggered by fears of heightened scrutiny from antitrust regulators.

The tech-heavy Nasdaq confirmed correction territory on Monday, having lost 10.3% since its record closing high on May 3. The S&P 500 is about 6% away from its all-time high hit on May 1.

At 12:45 p.m. ET the Dow Jones Industrial Average was up 423.32 points, or 1.71%, at 25,243.10, the S&P 500 was up 44.10 points, or 1.61%, at 2,788.55 and the Nasdaq Composite was up 142.47 points, or 1.94%, at 7,475.49.

Rising U.S. Treasury yields boosted bank stocks, which jumped 3.06% and were on course for their biggest one-day gain in five-months.

All but the dividend-paying utilities and real estate, typically seen as defensive sectors, were in the red.

Advancing issues outnumbered decliners by a 3.45-to-1 ratio on the NYSE and by a 2.77-to-1 ratio on the Nasdaq.

The S&P index recorded 24 new 52-week highs and one new low, while the Nasdaq recorded 31 new highs and 53 new lows.

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