Market Minute: ‘Risk-On!’ – Stocks Surge on Positive Tariff News

U.S. stocks rallied sharply on Monday in response to a surprise 90-day tariff pause announced by the United States and China following weekend trade talks in Geneva, Switzerland. The agreement, which significantly reduces trade barriers between the world’s two largest economies, alleviated fears of a deepening trade war, boosting investor confidence worldwide.

The breakthrough came after negotiations led by U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng. Under the deal, U.S. tariffs on Chinese imports were slashed from 145% to 30%, while China reduced duties on U.S. goods from 125% to 10%, effective Wednesday, May 14. Bessent emphasized that neither side sought economic “decoupling,” stating, “We have reached an agreement on a 90-day pause and substantially move down the tariff levels.”

The pause also saw China lift restrictions on rare earth minerals and Boeing (BA) plane deliveries, further signaling a thaw in tensions. However, some cautioned that the temporary nature of the truce, coupled with unresolved issues like the U.S. trade deficit and fentanyl concerns, could lead to renewed volatility if talks falter.

Investors cheered the de-escalation, with market watchers calling the deal “better than expected” and a “game changer.” The benchmark S&P 500 (SPX) jumped 3.26% on Monday, marking its strongest single-day gain since April 9, driven by tariff-sensitive sectors like technology and consumer discretionary. The Nasdaq-100 (NDX) climbed 4%, with companies such as Apple (AAPL), which relies heavily on Chinese manufacturing, and Tesla (TSLA), a major player in China’s EV market, posting gains of nearly 6.2% and 6.75%, respectively. The Dow Jones Industrial Average (DJI) rose 2.8%, or over 1,160 points, closing at 42,410.10. Volatility cratered on Monday with the CBOE’ VIX settling near the 18 level, its lowest closing price since late March.

Stocks are giving up some of the massive gains this morning, but the S&P 500 is now only 5% below its all-time high in February. Investor focus will be on inflation data today with the Consumer Price Index (CPI) due. CPI is expected to remain at a 2.4% rate in April on a year-over-year basis. Excluding food and energy, so-called core inflation is expected to run at a 2.8% annual rate, also unchanged from the prior month. Traders will also watch for headlines on President Trump’s visit to the Middle East. The trip, the first major overseas tour since Trump returned to the White House, is largely expected to focus on business deals and new investments from the oil-rich region. Business leaders from Nvidia’s (NVDA) CEO Jensen Huang to Tesla’s (TSLA) Elon Musk are in attendance and could provide investment moves by major corporations.