US stocks surged on Monday, delivering one of their strongest single-day performances this year after the United States and China agreed to a temporary reduction in tariffs following high-stakes negotiations in Switzerland over the weekend.
The unexpected breakthrough eased investor fears of a deepening trade war and a potential recession, sparking a broad market rally led by technology and consumer discretionary stocks.
The Dow Jones Industrial Average jumped 1,136 points, or 2.7%, holding near session highs throughout the day as investors piled back into equities.
The S&P 500 soared 3%, now up more than 20% from its April lows when tariff tensions peaked.
The Nasdaq Composite surged 4%, with tech giants like Tesla and Apple leading the charge amid optimism about stronger US-China ties.
Another round of talks expected ‘within the next few weeks’
Treasury Secretary Scott Bessent told CNBC on Monday that talks with Chinese officials had been “very productive,” with both nations agreeing to temporarily lower tariffs.
The US reduced its tariffs on Chinese goods to 30%, while China dropped its tariffs on American imports to 10%.
Bessent added that another round of talks was expected “within the next few weeks” to push toward a broader and more permanent deal.
Tesla stock jumped 7%, propelling the EV maker back into the $1 trillion market cap club for the first time since February.
Apple and Nvidia gained 6% and 5%, respectively, while Amazon, Dell Technologies, and Best Buy each rallied 6%–8%, reflecting bullish sentiment around firms heavily exposed to Chinese markets.
The initial breakthrough follows weeks of intense pressure, with tariff tensions reaching a boiling point in April after President Donald Trump hiked tariffs on Chinese imports to 145%, prompting a retaliatory 125% move by Beijing.
The recent rollback marks a significant de-escalation and gives markets breathing room.
Investor confidence up
Investor confidence was further bolstered by last week’s announcement of a preliminary US-UK trade agreement, and Monday’s US-China development provided another leg up.
Although President Trump suggested tariffs could still be lowered further to 60% or even 80% if talks progress positively, he acknowledged that a finalized deal “won’t come quickly.”
Treasury yields climbed as the tariff detente was seen reducing the likelihood of a near-term recession and lowering expectations for imminent Federal Reserve interest rate cuts.
Oil prices also surged in response to the improved economic outlook.
On the flip side, defensive stocks that had served as safe havens during trade uncertainty retreated. Coca-Cola and Philip Morris both declined by 2%, while AT&T fell 3%.
Wall Street’s fear gauge, the CBOE Volatility Index (VIX), dropped below 20 for the first time since March, reflecting easing investor anxiety.
The index peaked at 60.13 in early April during the height of trade tensions and had remained elevated until this week’s developments.
In sector performance, consumer discretionary stocks posted their best day in over a month, with the S&P 500 sector gaining more than 5%.
Carnival surged 10%, while Wynn Resorts and Williams-Sonoma rose 8%. Amazon added over 7%, underscoring the sector’s sensitivity to trade policy.
China-focused ETFs and pharma stocks jump
The KraneShares CSI China Internet ETF (KWEB) gained over 5%, while the iShares China Large-Cap ETF (FXI) and iShares MSCI China ETF (MCHI) climbed more than 3%. US-listed Chinese stocks such as Alibaba, JD.com, and Baidu rallied between 5% and 7%.
Pharmaceutical stocks reversed earlier losses after an executive order on drug pricing was seen as less damaging than feared.
The iShares US Pharmaceuticals ETF (IHE) added 1.7%. Merck, Pfizer, and Bristol-Myers Squibb gained over 2%–5%.
However, pharmacy retailers like CVS and Cencora fell due to the risk of being bypassed in direct-to-consumer models.
Hims & Hers Health, a telehealth company, spiked more than 7% on speculation it could benefit from the shift.
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