US-China tariff truce sparks Wall Street rally, S&P 500 hits two-month high

Wall Street’s three major indexes rose sharply on Monday with the S&P 500 marking its highest level since early March as a US-China agreement to temporarily slash tariffs brought some hopes for the easing of a global trade war, which US President Donald Trump ignited in early April.

The US and China announced on Monday that they would slash steep tariffs on each other for 90 days. The US said it will cut tariffs imposed on Chinese imports to 30% from 145% while China said it would cut duties on US imports to 10% from 125%.

Investors showed some relief by favoring riskier assets and turning away from more defensive bets, but they were still left waiting for clarity on where tariffs would ultimately settle.

“It’s a relief rally because there was a lot of anxiety and angst about tariffs between the US and China,” said John Praveen, managing director at Paleo Leon in Princeton, New Jersey, adding that the world’s two biggest economies appeared to be working to avoid the worst-case tariff scenarios.

“They are going to scale it down to much more reasonable levels so the fall-out from tariffs will probably be more manageable and limited,” said Praveen.

Chris Brigati, chief investment officer at SWBC, an investment company in San Antonio, Texas, said “the market perceives any progress as positive.”

“The market is celebrating it for the moment, but in the long run, there could be complications, and we could see some negative implications,” Brigati said.

US stocks had weathered steep losses and unusually high volatility after Trump announced tariffs on multiple US trade partners on April 2.

Since then, an April 9 announcement of a 90-day pause for countries besides China, solid earnings reports and last week’s US-UK limited trade agreement have helped both the S&P 500 and the tech-heavy Nasdaq regain their lost ground.

On Monday, the S&P 500, the Nasdaq and the Dow all boasted their biggest single-day percentage gains since April 9 and the S&P broke above its 200-day moving average for the first time since late March.

The Dow Jones Industrial Average rose 1,160.72 points, or 2.81%, to 42,410.10 for its highest close since March 26.

The S&P 500 gained 184.28 points, or 3.26%, to finish at 5,844.19, its highest close since March 3 while the Nasdaq Composite .IXIC gained 779.43 points, or 4.35%, to 18,708.34 for its highest finish since February 28.

Nasdaq closed more than 22% above its lowest session close in the April tariff sell-off but was still almost 8% below its Dec 16 record close.

Wall Street’s “fear gauge”, the CBOE Volatility Index, which had hit a peak of 60 in April due to tariff fears, traded below 20 on Monday for the first time since late March. In commodities, safe-haven gold fell about 2.6%.

Of the 11 S&P sub-sectors, defensive utilities was the sole loser by the end of the session, falling 0.68% while the strongest sectors were heavyweight consumer discretionary, which added 5.66% and technology, which climbed 4.66%.

In technology, Apple rallied 6.3% after a report that it was considering raising the prices of its fall iPhone lineup.

The earnings season is winding down, with more than 90% of the S&P 500 companies having reported so far. Numbers from retail giant Walmart are due later this week.

Shares in NRG Energy soared 26.2% and lead S&P 500 advancers after the utility said it would acquire power generation assets from energy infrastructure investment firm LS Power in a deal valued at $12 billion.

Several Federal Reserve officials, including Chair Jerome Powell, are slated to make public remarks over the week.

Traders expect the Fed to deliver two 25-basis-point rate reductions by the end of 2025, with the first cut now expected in September, according to data compiled by LSEG.

Advancing issues outnumbered decliners by a 2.83-to-1 ratio on the NYSE where there were 165 new highs and 43 new lows.

On the Nasdaq, 3,285 stocks rose and 1,158 fell as advancing issues outnumbered decliners by a 2.84-to-1 ratio. The S&P 500 posted 15 new 52-week highs and 3 new lows while the Nasdaq Composite recorded 83 new highs and 50 new lows.

On US exchanges about 20.20 billion shares changed hands compared with the 16.52 billion moving average for the last 20 sessions.

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