US stocks end sharply higher on China-US trade deal. S&P 500 hits more than 2-month high
U.S. stocks closed sharply higher, with the blue-chip Dow surging more than 1,000 points, after the U.S. announced a trade deal with China.
The U.S. and China put a 90-day pause on most of the tariffs the countries had imposed on one another. Effective from Wednesday, the U.S. will temporarily reduce tariffs on China to 30%, down from 145%, and China will reduce tariffs on U.S. goods to 10%, down from 125%.
"This was a larger-than-expected de-escalation...though the negotiation process will likely remain challenging," said Lynn Song, chief economist of greater China at Dutch bank ING.
As the deadline for the 90-day pause nears, tensions may reescalate, some said.
"Expect volatility as we approach the 90-day reciprocal tariffs deadline," wrote Gina Bolvin, president of Bolvin Wealth Management Group, in a note. "But today, the market is blowing through resistance levels and if it sticks, this is a big WIN for Trump, for stocks and for investors."
The Dow soared 2.81%, or 1,160.72 points, to 42,410.10; while the broad S&P 500 jumped 3.26%, or 184.28 points, to 5,844.19; and the tech-heavy Nasdaq rallied 4.35%, or 779.43 points, to 18,708.34. The S&P 500 touched the highest level in more than two months.
The benchmark 10-year Treasury yield rose to 4.475% as investors bet better tariff terms with China could save the economy from a recession and the Federal Reserve wouldn't have to cut rates any time soon. Oil prices also rose more than 1% on hopes a chugging economy will keep up demand. Gold prices shed about 3% as the need faded for a safe-haven investment.
China's Vice Premier He Lifeng described the meetings on Sunday as "candid, in-depth and constructive" and said "substantial progress was made and important consensus was reached," according to Chinese state media.
Treasury Secretary Scott Bessent said on Monday morning he expected to meet with Chinese officals again in coming weeks to further discuss trade.
“I would imagine in the next few weeks we will be meeting again to get rolling on a more fulsome agreement,” Bessent said on CNBC’s “Squawk Box.”
A deal with China, one of the U.S.' top trading partners, is seen as a relief for investors who worried tariffs as high as 145% would severely limit trade, raise prices and hurt the U.S. economy.
The U.S. and the U.K. announced a trade deal framework last week that started to turn sentiment more optimistic that Trump could get trade deals done.
Gains across the board
The tariff pause is positive for companies, analysts said.
"Management teams could witness significantly fewer costs, as most businesses have opted to plan with the assumption of a 145% tariff in place," said Randal Konik, equity analyst at Jefferies.
That should help earnings outlooks, experts said. "Corporate America can handle 10% tariffs, and this will only be a 2% hit to earnings, not the 5% that rattled markets," said Gina Bolvin, president of Bolvin Wealth Management Group.
- Retail: Tariff relief from the U.S.- China deal boosted major retailers like Target, Home Depot and Best Buy that sell a lot of "Made in China" goods. Target shares gained almost 5%, Home Depot added nearly 4% and Best Buy rose more than 6.5%. Home furnishing retailer Williams-Sonoma, which sources nearly a quarter of products from China, and Nike, which makes about 18% of its footwear in China, also saw jumps in their stock prices.
Small businesses like those who sell on Amazon Marketplace also will feel relief. Amazon shares jumped 8%.
- U.S. listed Chinese stocks: Chinese companies, including ecommerce giant Alibaba, Chinese tech stocks like JD.com and PDD, and EV manufacturers Nio, XPeng and Li Auto, rallied. Alibaba rose 5.82%, JD.com added 6.47%, PDD rallied 6.14%, NIO rose 5.79%, XPeng was up 7.62% and Li Auto gained 6.57%.
- Auto makers: Shares of car makers that rely on Chinese parts rose. Ford stock was up 2.53% and GM gained 4.48%.
- Tech stocks: Apple, which assembles many of its iPhones in China and said it may raise iPhone prices, saw its stock jump more than 6%. Tesla rose 6.75%, regaining its market capitalization above $1 trillion for the first time since February. China is a key market for the EV maker. Chip stocks also soared, with the iShares Semiconductor ETF (SOXX) having its best day since April 9.
Slushies and coffee are back on
SharkNinja Chief Executive Mark Barrocas instructed factories in China to release hundreds of containers of goods bound for the U.S., including coffee makers and the Ninja Slushie, a frozen drink maker, after news broke of the U.S.-China trade deal, the Wall Street Journal reported.
Still, SharkNinja is still looking to build a factory in the U.S. to produce low-labor intensive products like coolers and certain vacuum cleaners, the story said. Barrocas said the factory would have to be built from the ground up and goods wouldn’t start rolling off the production lines until the end of 2026 at the earliest, the WSJ said.
SharkNinja shares rose 7.37%.
Non-tariff related mover tops gainers
In a non-tariff related move, NRG Energy jumped 26.21% and was the biggest percentage gainer in the S&P 500 after the utility said it would acquire power generation assets from energy infrastructure investment firm LS Power in a deal valued at $12 billion.
'Most favored nation' for drug pricing
President Donald Trump signed an executive order giving drugmakers price targets in the next 30 days, and will take further action to lower prices if those companies do not make "significant progress" towards those goals within six months of the order being signed.
"I will be instituting a MOST FAVORED NATION’S POLICY whereby the United States will pay the same price as the Nation that pays the lowest price anywhere in the World," Trump said in an earllier post on Truth Social. "Our Country will finally be treated fairly, and our citizens Healthcare Costs will be reduced by numbers never even thought of before."
Trump tried a similar move in his first term to bring the U.S. in line with other countries but was blocked by the courts.
Cryptocurrency
MicroStrategy founder and executive chairman Michael Saylor announced that the firm acquired 13,390 bitcoin for approximately $1.34 billion from May 5-11.
MicroStrategy is now known as Strategy.
Bitcoin was last down 2.08% at $101,880.40.
This story was updated with new information.
Medora Lee is a money, markets, and personal finance reporter at Paste BN. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.