U.S. Stocks Likely To See Early Rally Following U.S.-China Trade Deal

Stocks are likely to show a strong move to the upside in early trading on Monday, more than offsetting the modest losses posted last week. The major index futures are currently pointing to a sharply higher open for the markets, with the S&P 500 futures up by 3.2 percent.

The upward momentum on Wall Street comes following news of a U.S.-China trade deal that drastically reduces the massive tariffs on each other’s goods.

The White House said the agreement calls for the U.S. and China to each lower tariffs by 115 percent while retaining an additional 10 percent tariff.

The U.S. will retain tariffs imposed in response to the fentanyl national emergency, resulting in an effective tariff rate on Chinese goods of 30 percent.

In previous tit-for-tat moves, tariffs on U.S. and Chinese goods had spiked as high as 125 percent and 145 percent, respectively, which Treasury Secretary Scott Bessent had described as the “equivalent of an embargo.”

The White House said the 34 percent reciprocal tariffs on U.S. and Chinese goods will be suspended for 90 days beginning Wednesday, May 14th.

Both nations also agreed to establish a mechanism to continue important discussions about trade and economics, the White House said.

“While the trade spat has only been dialed back for 90 days, it’s a major breakthrough as far as investors are concerned,” said Russ Mould, investment director at AJ Bell. “The fact the two countries were talking was already a major win given they’ve been at each other’s throats during the first and second Trump presidential terms.”

“Some people thought the best-case outcome from the weekend’s discussions would be an agreement to simply keep talks going,” he added. “Therefore, to have reached an initial deal so quickly and one that rolls back tariffs by a large amount is a pleasant surprise.”

After failing to sustain an initial move to the upside, stocks showed a lack of direction over the course of the trading session on Friday. The major averages spent much of the day bouncing back and forth across the unchanged line before eventually closing narrowly mixed.

While the Nasdaq crept up 0.78 points or less than a tenth of a percent to 17,928.92, the S&P 500 edged down 4.03 points or 0.1 percent to 5,659.91 and the Dow dipped 119.07 points or 0.3 percent to 41,249.38.

For the week, the S&P 500 declined by 0.5 percent, the Nasdaq fell by 0.3 percent and the Dow slipped by 0.2 percent.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Monday. Japan’s Nikkei 225 Index rose by 0.4 percent, China’s Shanghai Composite Index advanced by 0.8 percent and Hong Kong’s Hang Seng Index soared by 3.0 percent.

The major European markets have also moved to the upside on the day. While the French CAC 40 Index is up by 1.5 percent, the German DAX Index and the U.K.’s FTSE 100 Index are both up by 0.7 percent.

In commodities trading, crude oil futures are spiking $2.38 to $63.40 a barrel after jumping $1.11 to $61.02 a barrel last Friday. Meanwhile, after surging $38 to $3,344 an ounce in the previous session, gold futures are plunging $111.10 to $3,232.90 an ounce.

On the currency front, the U.S. dollar is trading at 148.01 yen versus the 145.37 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1115 compared to last Friday’s $1.1250.

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