U.S.-China Trade Deal Sparks Rally On Wall Street

(RTTNews) - Stocks moved sharply higher during trading on Monday, more than offsetting the modest weakness seen in the previous week. With the strong upward move, the Nasdaq and the S&P 500 reached their best closing levels in over two months.

The major average saw further upside going into the close, reaching new highs for the session. The Nasdaq soared 779.43 points or 4.4 percent to 18,708.34, the S&P 500 spiked 184.28 points or 3.3 percent to 5,844.19 and the Dow surged 1,160.72 points or 2.8 percent to 42,420.10.

The rally on Wall Street came following news of a U.S.-China trade deal that drastically reduces the massive tariffs on each other's goods.

The White House said the agreement calls for the U.S. and China to each lower tariffs by 115 percent while retaining an additional 10 percent tariff.

The U.S. will retain tariffs imposed in response to the fentanyl national emergency, resulting in an effective tariff rate on Chinese goods of 30 percent.

In previous tit-for-tat moves, tariffs on U.S. and Chinese goods had spiked as high as 125 percent and 145 percent, respectively, which Treasury Secretary Scott Bessent had described as the "equivalent of an embargo."

The White House said the 34 percent reciprocal tariffs on U.S. and Chinese goods will be suspended for 90 days beginning Wednesday, May 14th.

Both nations also agreed to establish a mechanism to continue important discussions about trade and economics, the White House said.

"While the trade spat has only been dialed back for 90 days, it's a major breakthrough as far as investors are concerned," said Russ Mould, investment director at AJ Bell. "The fact the two countries were talking was already a major win given they've been at each other's throats during the first and second Trump presidential terms."

"Some people thought the best-case outcome from the weekend's discussions would be an agreement to simply keep talks going," he added. "Therefore, to have reached an initial deal so quickly and one that rolls back tariffs by a large amount is a pleasant surprise."

Sector News

Semiconductor stocks turned in some of the market's best performances amid a broad based rally, with the Philadelphia Semiconductor Index soaring by 7.0 percent to its best closing level in well over two months.

Substantial strength was also visible among transportation stocks, as reflected by the 7.0 percent spike by the Dow Jones Transportation Average. The average also reached a two-month closing high.

Computer hardware stocks also showed a significant move to the upside, driving the NYSE Arca Computer Hardware Index up by 6.5 percent.

Networking, biotechnology and banking stocks also saw considerable strength, while gold stocks were among the few groups to buck the uptrend, moving sharply lower along with the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Monday. Japan's Nikkei 225 Index rose by 0.4 percent, China's Shanghai Composite Index advanced by 0.8 percent and Hong Kong's Hang Seng Index soared by 3.0 percent.

The major European markets also moved to the upside on the day. While the French CAC 40 Index jumped by 1.4 percent, the U.K.'s FTSE 100 Index climbed 0.6 percent and the German DAX Index rose by 0.3 percent.

In the bond market, treasuries moved sharply lower in reaction to the U.S.-China trade deal. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, surged 8.2 basis points to a one-month closing high of 4.457 percent.

Looking Ahead

Trading on Tuesday may be impacted by reaction to the Labor Department's report on consumer price inflation in the month of April.