Dow jumps more than 1,000 point as U.S. and China agree to slash tariffs for 90 days

The recent news of a temporary agreement between the United States and China to ease tariffs has had a significant impact on the stock market, with stocks soaring on Monday in response to the announcement. The S&P 500 rose by 3.3%, closing at 5,844, while the Dow Jones Industrial Average jumped by 2.8%, closing at 42,410. This surge in stock prices provided some much-needed relief to investors who had been concerned about the potential impact of escalating tariffs on the global economy.

Tech companies, in particular, saw a boost in their stock prices, with the Nasdaq Composite rising by 4.4%. Companies like Nvidia and Apple saw their shares gain 5.4% and 6.3% respectively, as investors welcomed the news of reduced tariffs and export restrictions.

The agreement, which was announced in a joint statement released by the White House, will see both countries substantially lower tariffs for a period of 90 days starting from May 14. The U.S. tariff on Chinese imports will be reduced to 30% from as high as 145%, while China’s rate on American goods will be lowered to 10% from 125%. Despite these reductions, the 10% baseline tariff and other U.S. measures will remain in place.

UBS Global Wealth Management projects that the U.S. tariff on Chinese imports will ultimately settle around 30% to 40%. Investors are cautiously optimistic about the agreement, with a focus on turning this temporary fix into a lasting agreement. The value of the dollar climbed against other major currencies, while crude oil prices jumped more than 3% during midday trading. Yields on the 10-Year Treasury also rose to 4.5%, the highest since April 11.

While investors are pleased with the market rally following the announcement of the tariff agreement, there is also a sense of caution as the U.S. and China approach the end of the tariff pause in August. Market volatility is expected as the 90-day reciprocal tariffs deadline approaches. However, the successful negotiation of the agreement with China has paved a smoother road ahead for Wall Street investors.

The news of reduced tariffs has also had a positive impact on various industries, with companies across retail, tech, and travel sectors seeing widespread gains. Companies like Amazon, Delta Air Lines, American Airlines, Carnival cruise line, and Norwegian cruise line all saw significant increases in their stock prices. Apparel and footwear companies, whose production is often based in China and Asia, also experienced notable gains, with companies like Lululemon and Nike seeing their stock prices rise.

Overall, the agreement between the U.S. and China to ease tariffs has been met with optimism by investors, as it offers a potential path towards resolving trade tensions and avoiding a global economic downturn. The market is hopeful that this temporary agreement can be turned into a lasting solution, leading to further growth and stability in the stock market.