A trader works on the floor of the New York Stock Exchange (NYSE) at the opening bell on May 12, 2025, in New York City.ANGELA WEISS/AFP/Getty Images
Wall Street’s three major indexes rallied sharply on Monday, with the S&P 500 hitting its highest levels since early March, as a U.S.-China agreement to temporarily slash tariffs brought some hopes for the easing of a global trade war.
The TSX also rose, but was held back by a decline in gold prices and some interest rate sensitive stocks, which were hampered by a sharp rise in bond yields.
The U.S. and China announced on Monday that they would slash steep tariffs on each other for 90 days. The U.S. said it will cut tariffs imposed on Chinese imports to 30% from 145% while China said it would cut duties on U.S. imports to 10% from 125%.
Investors showed some relief by favouring riskier assets and turning away from more defensive bets, but they were still left waiting for clarity on where tariffs would ultimately settle.
“This is a relief rally that the worst case scenario in tariffs, being tariffs over 100%, is not likely to materialize,” said John Praveen, managing director at Paleo Leon in Princeton, New Jersey. “We may not get zero tariffs but the worst case is unlikely. We’ve pulled back from the brink.”
Chris Brigati, chief investment officer at SWBC, an investment company in San Antonio, Texas, said “the market perceives any progress as positive.”
“The market is celebrating it for the moment, but in the long run, there could be complications, and we could see some negative implications,” Brigati said.
U.S. President Donald Trump announced tariffs on multiple U.S. trade partners on April 2. Since then, an April 9 announcement of a 90-day pause for countries besides China, solid earnings reports and last week’s U.S.-UK limited trade agreement have helped both the S&P 500 and the tech-heavy Nasdaq regain their lost ground.
On Monday, the S&P 500, the Nasdaq and the Dow all boasted their biggest single-day percentage gains since April 9 and the S&P broke above its 200-day moving average for the first time since late March.
The Dow Jones Industrial Average rose 1,160.72 points, or 2.81%, to 42,410.10 for its highest close since March 26. The S&P 500 gained 184.28 points, or 3.26%, to finish at 5,844.19, its highest close since March 3 while the Nasdaq Composite gained 779.43 points, or 4.35%, to 18,708.34 for its highest finish since February 28.
The Nasdaq closed more than 22% above its lowest session close in the April tariff sell-off but was still almost 8% below its Dec 16 record close.
The S&P/TSX composite index ended up 174.44 points, or 0.7%, at 25,532.18, its highest closing level since February 19.
While the TSX bounce wasn’t as impressive as in the U.S., BMO chief economist Douglas Porter noted there’s good reason for investors to feel more optimistic on this side of the border as well.
“The China-U.S. trade news is at least indirectly positive for the Canadian economy and markets—a healthier global economy is supportive of commodity prices and Canadian exports,“ Porter said in a note. ”Equity markets have certainly taken on a healthier glow, with the TSX completely erasing the post-reciprocal-tariff sell-off, and now back within 1% of all-time highs."
The TSX technology sector gained 5.5% as shares of e-commerce company Shopify Inc rallied 14.1%. The Nasdaq stock exchange announced the e-commerce company would join its 100 Index on May 19.
The price of oil settled 1.5% higher at US$61.95 a barrel, boosting energy which added 3%.
Consumer discretionary was up 2.4% as shares of apparel retailer Aritzia Inc and auto parts company Magna International Inc jumped.
Some of gold’s safe-haven attraction faded which weighed on the materials group. The group was down 4.9%. Shares of Pan American Silver Corp tumbled 15.9% after a deal to acquire MAG Silver Corp. MAG Silver shares gained 5.5%. Hudbay Minerals Inc shares jumped nearly 9% after the miner’s first-quarter results beat estimates.
The TSX utilities sector, a defensive area of the market sensitive to bond yields, lost more than 1%. The yield on the benchmark U.S. 10-year Treasury note rose 8.6 basis points to 4.461%, and the U.S. dollar also rose sharply.
The Treasury market’s response appeared at odds with the Trump administration’s goal of bringing down yields on government debt, which provide benchmarks for a wide range of borrowing costs.
“Bessent’s goal of getting long-term rates down is now in tatters,” said Dean Smith, chief strategist at FolioBeyond in New York.
Wall Street’s “fear gauge”, the CBOE Volatility Index, which had hit a peak of 60 in April due to tariff fears, traded below 20 on Monday for the first time since late March. In commodities, safe-haven gold fell about 2.6%.
Of the 11 S&P sub-sectors, defensive utilities was the sole loser by the end of the session, falling 0.68% while the strongest sectors were heavyweight consumer discretionary , which added 5.66% and technology, which climbed 4.66%.
In technology, Apple rallied 6.3% after a report that it was considering raising the prices of its fall iPhone lineup.
The earnings season is winding down, with more than 90% of the S&P 500 companies having reported so far. Numbers from retail giant Walmart are due later this week.
Shares in NRG Energy soared 26.2% and lead S&P 500 advancers after the utility said it would acquire power generation assets from energy infrastructure investment firm LS Power in a deal valued at $12 billion.
Several Federal Reserve officials, including Chair Jerome Powell, are slated to make public remarks over the week.
Traders expect the Fed to deliver two 25-basis-point rate reductions by the end of 2025, with the first cut now expected in September, according to data compiled by LSEG.
Advancing issues outnumbered decliners by a 2.83-to-1 ratio on the NYSE where there were 165 new highs and 43 new lows.
On the Nasdaq, 3,285 stocks rose and 1,158 fell as advancing issues outnumbered decliners by a 2.84-to-1 ratio. The S&P 500 posted 15 new 52-week highs and 3 new lows while the Nasdaq Composite recorded 83 new highs and 50 new lows.
On U.S. exchanges about 20.20 billion shares changed hands compared with the 16.52 billion moving average for the last 20 sessions.
Reuters, Globe staff