Wall Street stocks surge as US, China agree to ease trade tensions with tariff cuts
(Reuters) – US stocks opened on a high note on Monday as major index futures jumped after the United States and China said they would cut import tariffs on each other, a major step toward easing tensions in the protracted trade war between the world’s two largest economies.
The United States will reduce additional tariffs on Chinese goods from 145% to 30% starting in April, according to an official announcement. China, in turn, will lower its import tariffs from 125% to 10%. The tariff reduction agreement will take effect in 90 days, opening the door to a longer-term trade agreement.
“This is a very significant de-escalation, but there is no guarantee that this 90-day agreement will lead to a comprehensive deal,” said Mark Williams, chief Asia economist at Capital Economics.
At 7:00 a.m. ET, Dow E-minis were up 1,045 points (2.5%), S&P 500 E-minis were up 3.2%, while Nasdaq 100 E-minis were up 4.1% – reflecting strong investor optimism.
The CBOE Volatility Index (VIX) – considered the market’s “fear gauge” – fell below 20 for the first time since late March, suggesting that market sentiment is stabilizing.
Big tech stocks led the way, with Nvidia (NASDAQ: NVDA) rising 5.1% and Apple (NASDAQ: AAPL) jumping 6.8% on news that the company may raise iPhone prices for its fall launch. Tesla (NASDAQ: TSLA) jumped 8.2% in early trading.
Chipmakers AMD (NASDAQ: AMD) and Marvell Technology (NASDAQ: MRVL) also rose 7.5% and 8.7%, respectively, while energy stocks Chevron (NYSE: CVX) and Exxon Mobil (NYSE: XOM) both rose more than 2% as crude oil prices rose more than 3% on news of the US-China deal.
The deal comes just days after the US and the UK also reached a limited trade deal, easing concerns about a wave of global tariffs that could drag the world economy into recession.
By the end of last week, the Dow and S&P 500 had recovered most of their losses since early April, while the Nasdaq had regained all of its earlier gains, helped by strong earnings reports and a more dovish tone from the White House.
However, not all sectors were benefiting. Pharmaceutical stocks were under pressure after the US president said he would step up drug price controls. Pfizer (NYSE: PFE) and Johnson & Johnson (NYSE: JNJ) fell 2.9% and 3.1%, respectively, while Eli Lilly (NYSE: LLY) lost 4.2%.
This week, major companies such as Walmart (NYSE: WMT), Cisco (NASDAQ: CSCO) and Deere & Co (NYSE: DE) will report quarterly financial results, while data on inflation (CPI) and retail sales are also awaited as important indicators for the Fed's interest rate policy.
Several Fed officials, including Chairman Jerome Powell, will also speak publicly this week — comments that could have a big impact on expectations for year-end monetary policy.