US stocks soared on Monday following the announcement of a temporary trade deal between the United States and China, which included a pause in reciprocal tariffs. Investors were relieved by the news, as markets had been concerned about the economic damage caused by the ongoing trade war.
Market Reaction to the Tariff Reduction
The S&P 500 (^GSPC) rose by 3%, while the Dow Jones Industrial Average (^DJI) gained 2.7%, or over 1,000 points. The Nasdaq Composite (^IXIC), led by tech stocks, surged nearly 4.2%. This marks one of the best trading days in recent memory, as investors cheered the scope of the tariff reductions between the two superpowers.
Details of the US-China Trade Deal
Under the agreement, the US has reduced its tariffs on most Chinese imports from a hefty 145% to 30%, while China has dropped its tariffs on US goods from 125% to 10%. The 90-day tariff pause is seen as a positive step toward de-escalating the trade war and reducing the uncertainties that had been weighing heavily on global markets.
Big Tech Stocks Rebound
Shares of major technology companies, which had been hit hard by the trade war, saw significant gains. Nvidia (NVDA), a leader in AI chip production, jumped 5%. Amazon (AMZN), Apple (AAPL), and Tesla (TSLA) also saw strong gains, further fueling optimism in the markets.
Trump’s Executive Order on Drug Prices
On the same day, President Trump signed an executive order aimed at lowering drug prices in the US. The move promises to cut prices by at least 59%, though it could raise prices in foreign markets, potentially boosting revenue for pharmaceutical companies. According to Axios, a White House official confirmed that the plan could have a mixed impact globally.
Market Movements in Other Sectors
The US dollar (DX=F) and Treasury yields (^TNX) both saw increases, and oil prices (CL=F, BZ=F) rallied as commodities surged. This shift suggests broader investor confidence as the temporary tariff reduction helps alleviate trade war worries.
Upcoming Inflation Data
Traders are awaiting the release of key inflation data this week, which could provide insight into the initial effects of Trump’s tariffs on prices. The April Consumer Price Index (CPI) report will be released on Tuesday, followed by retail sales and the Producer Price Index (PPI) on Thursday. These reports will likely shape expectations for inflation and economic growth moving forward.