Stocks Power Global Risk Rally on US and China Truce: Markets Wrap

A sharp rebound in risk-appetite amid a reprieve in the trade war between the US and China spurred a rally in stocks, with hopes for a broader agreement between the world’s two largest economies sending bonds, gold and haven currencies lower.

Wall Street powered ahead after solid gains in Asia and Europe, with the S&P 500 jumping about 2.5% to trade above President Donald Trump’s April 2 “Liberation Day” shock. Economically sensitive industries led gains, a gauge of smaller firms jumped 3.6% and big tech drove the Nasdaq 100 toward a bull market. As concerns over the economic outlook ebbed, traders rushed to pare wagers on rate cuts, driving a surge in short-term yields. The dollar rose almost 1%.

Trump said he would likely speak to Chinese leader Xi Jinping later this week following talks between Washington and Beijing to temporarily lower tariffs and de-escalate the trade war. The three-month lowering of import duties will give the countries time to negotiate a more comprehensive deal on trade.

“The larger-than-expected drop in the tariffs between the US and China, while temporary, and the establishment of a framework for continued discussion, is exactly what the stock market was hoping to see,” said Carol Schleif at BMO Private Wealth.

The S&P 500 climbed 2.6%. The Nasdaq 100 rallied 3.2%. The Dow Jones Industrial Average added 2.4%.

The yield on 10-year Treasuries rose six basis points to 4.44%. The Bloomberg Dollar Spot Index rose 0.8%. Monday may be the opportunity that firms have been waiting for to issue US investment-grade bonds, with 15 potential borrowers weighing new sales.

“There’s still a very steep hill to climb to get a real agreement,” said Jamie Cox at Harris Financial Group. “The good news is that this pause gives US companies more time to adapt and to plan for contingencies should the trade talks go sideways again. Also, with any luck, the tax package may be across the finish line and investors will no longer have to worry about trade derailing tax.”

To Matt Maley at Miller Tabak, the news of a trade agreement between the US and China is certainly positive for the stock market. The question now is whether this change will be enough to help earnings growth reverse higher in a significant way or not.

With good news on the trade front giving a boost to stocks at the start of the week, it will be up to inflation data, retail sales, and earnings to sustain the momentum, according to Chris Larkin at E*Trade from Morgan Stanley.

“There’s still debate about how much tariffs have already disrupted supply chains and potentially slowed growth,” Larkin said. “While numbers that feed into the stagflation narrative could certainly derail the bullish mood, the economy still appears to be on solid ground, as Jerome Powell noted last week.”

Sentiment toward the US stock market is improving, but it’s too early for investors to sound the all-clear, according to Morgan Stanley strategists.

The team led by Michael Wilson identified four factors needed to sustain a more durable rally, but saw progress in just two: “Optimism around a trade deal with China and stabilizing earnings revisions,” they wrote in a note on Monday.

“The other two items on our checklist — a more dovish Fed and the 10-year yield below 4% without recessionary data — have yet to materialize.”

Corporate Highlights:

Apple Inc. is weighing raising prices for the iPhone lineup coming out later this year, the Wall Street Journal said, citing people familiar with the matter whom it didn’t identify.
Pharmaceutical companies fall after US President Donald Trump said he plans to order a cut in US prescription drug costs to bring them in line with other countries,
Eli Lilly & Co.’s obesity drug Zepbound helped people trim about two inches more off their waists than Novo Nordisk A/S’s Wegovy in the first head-to-head study of the rival medicines.
NRG Energy Inc. agreed to acquire natural gas-fired power assets from LS Power Equity Advisors LLC for about $12 billion including debt.
CrowdStrike Holdings Inc. Chief Executive Officer George Kurtz disclosed last month that he’d gifted over $1 billion worth of his company’s stock to undisclosed recipients, sharply reducing his influence over the company in an unusual move for a tech founder.
SoftBank Group Corp.’s plans to invest $100 billion in artificial intelligence infrastructure in the US have slowed, with economic risks stemming from Washington’s tariffs holding up financing talks.

Some of the main moves in markets:

Stocks