U.S. stocks are leaping Monday after China and the United States announced a 90-day truce in their trade war. They agreed to take down most of their tariffs that economists warned could start a recession and create shortages on U.S. store shelves.
The S&P 500 was 2.6% higher in early trading and back within 5.5% of its all-time high set in February. Since falling nearly 20% below that mark last month, the index has been roaring higher on hopes that President Donald Trump will lower his tariffs after reaching trade deals with other countries. The index, which sits at the heart of many 401(k) accounts, is back above where it was on April 2, Trump's "Liberation Day," when he announced stiff worldwide tariffs that caused worries to spike about a potentially self-inflicted recession.
The Dow Jones Industrial Average was up 957 points, or 2.3%, as of 9:35 a.m. Eastern time, and the Nasdaq composite was 3.6% higher.
It wasn't just stocks surging following what one analyst called a "best case scenario" for US-China tariff talks. Crude oil prices jumped more than 3% because a global economy less weakened by tariffs would be hungrier for fuel. The value of the dollar climbed against everything from the euro to the Japanese yen to the Swiss franc. And Treasury yields jumped on expectations that the Federal Reserve won't have to cut interest rates so deeply this year in order to protect the economy from the damage of tariffs.
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Of course, conditions could change quickly again, as Wall Street has seen all too often in Trump's on-again-off-again rollout of tariffs. Plus, the reduction in U.S. and China tariffs will last only 90 days. That's to give the world's two largest economies time for more talks, followed last weekend's negotiations in Geneva, Switzerland, that the U.S. side said had made " substantial progress."
Until then, a joint statement said the United States will cut tariffs on Chinese goods to 30% from as high as 145%. China said its tariffs on U.S. goods will fall to 10% from 125%. That follows a deal the United States announced last week with the United Kingdom that will bring down tariffs on many U.K. imports to 10%.
Big challenges remain in the negotiations between China and the United States, but the mood nevertheless was ebullient across Wall Street on Monday, and gains were widespread.
Apparel companies jumped to some of the biggest gains because much of their production is often in China and elsewhere in Asia. Lululemon leaped 10%, and Nike rose 7.3%.
Travel companies jumped on hopes that lower tariffs would encourage more customers to fly and feel comfortable enough to spend on trips. Carnival rose 8.9% and Norwegian Cruise Line rose 8%.
Retailers like Best Buy and Amazon jumped because they won't have to pass on high costs caused by tariffs to their own customers. Both rose at least 7%.
In stock markets abroad, indexes rose across most of Europe and Asia, though often by less than the U.S. market.
India's Sensex shot up 3.7% after India and Pakistan agreed to a truce after talks to defuse their most serious military confrontation in decades. The two armies have exchanged gunfire, artillery strikes, missiles and drones that killed dozens of people.
Pakistan's KSE 100 surged more than 9% and trading was halted for one hour following a spike driven by the ceasefire and an International Monetary Fund decision Friday to disburse about $1 billion of a bailout package for its battered economy.
In the bond market, the yield on the 10-year Treasury jumped to 4.45% from 4.37% late Friday. The two-year yield, which more closely tracks expectations for what the Fed will do with interest rates, jumped even more. It rose to 3.99% from 3.88% as traders ratchet back expectations for how many cuts to rates the Fed may deliver this year. Many now see just two cuts this year, according to data from CME Group.
