Stocks jumped out of the gate Monday on reports of productive trade talks between the U.S. and China. The momentum lasted into the close, too, with all three indexes putting a big dent in their year-to-date deficits.
Over the weekend, high-level trade negotiators from the two countries met in Geneva, Switzerland, where they agreed to a 90-day truce that drastically lowers retaliatory tariffs. The U.S. and China will continue trade talks over this period.
This followed news from late last week that the Trump administration had reached a trade agreement with the United Kingdom.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
These developments add to the "cautious optimism" that's been "lurking over the past few weeks among some investors that the Trump administration will soften its approach to trade and as a result will reduce the likelihood of a recession," says Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management.
The reaction to the U.S.-China trade news was swift, with the Dow Jones Industrial Average (+2.8% at 42,410), the S&P 500 (+3.3% at 5,844) and the Nasdaq Composite (+4.4% at 18,708) all closing sharply higher.
The three main indexes have now pared their year-to-date declines to between 0.5% and 3.5% after each being down by double-digit percentage points in early April.
This recovery from the April lows "has been surprising, especially against a macro backdrop riddled with questions over global trade policy," says Adam Turnquist, chief technical strategist for LPL Financial.
And this, he adds, has plenty of folks questioning the sustainability of the bounce, especially amid elevated uncertainty over where tariff rates will eventually land.
Bond yields spike as rate-cut hopes fade
Over in the bond market, Treasury yields spiked as rate-cut expectations plummeted. The 2-year Treasury yield rose 12.1 basis points to 4.004% and the 10-year Treasury yield jumped 9.8 basis points to 4.473%. (A basis point = 0.01%.)
According to CME FedWatch, betting odds for the Fed's next rate cut are now on the central bank's September meeting, with a 51% probability vs a 26% chance one week ago.
Amazon, Nike, Apple rise on U.S.-China trade deal
As for individual equities, Amazon.com (AMZN, +8.1%) and Nike (NKE, +7.3%) were the two best Dow Jones stocks today on expectations they'll see an outsized impact from the China tariff reprieve.
Apple (AAPL, +6.3%) was another outperforming blue chip stock, given the tech giant's heavy exposure to China. Still, the company faces higher tariffs than it did at the start of this year, and it's reportedly considering raising prices on its new iPhones.
NRG stock soars 26% on M&A news
NRG Energy (NRG, +26.2%) was the best S&P 500 stock on Monday after the utility company said it bought several natural gas generation facilities and a virtual power plant from LS Power for $12 billion in cash and stock.
NRG expects the acquisition to start adding to earnings immediately. It will also help reinforce the company's commitment to 7% to 9% annual dividend growth and $1 billion stock buybacks, it said in the press release.
"Assuming approval, the acquisition positions NRG as one of the largest U.S. natural gas generators, providing opportunities to capitalize on rising power demand trends, in our view," says CFRA Research analyst Daniel Rich (Buy).
Related content
- Why Has the IPO Market Gone Cold?
- When Is the Next CPI Report?
- Kiplinger's Economic Calendar for This Week (May 12-16)
- Earnings Calendar and Analysis for This Week (May 12-16)
-
Don't Waste Your Money on Bad Gifts. Try This Instead.Holiday Happiness These strategies, backed by behavioral finance, can help you find presents that your loved ones will truly enjoy.
-
5 Unique Book-Inspired Trips Across AmericaThere are five great trips to take across America that can immerse you in the culture of your favourite books.
-
I'm a Financial Planner: This Retirement GPS Helps With Navigating Your Drawdown PhaseReady to retire? Here's how to swap your 'peak earnings' mindset for a 'preserve-plus-grow' approach instead of relying on the old, risky 4% rule.
-
Donating Stock Instead of Cash Is the 2-for-1 Deal You'll Love at Tax TimeGiving appreciated stock or using a donor-advised fund (DAF) this year would be smarter than writing a check to support your favorite causes. Here's why.
-
Traveling With Purpose: What Zambia and Zimbabwe Taught Us About Slowing DownDon't treat retirement trips like they're an exercise in ticking off boxes. Slowing down and letting adventure unfold can create more meaningful memories.
-
Investment Expert: Is Your Retirement Portfolio Too Late to the Profit Party?If you're following the usual retirement investment model, you could be missing out on a potential profit period that companies see in the run-up to their IPOs.
-
Losing Your Job? A Financial Planner's 6 Steps to Survive and ThriveWhether pink slips are just rumors at your company or layoffs have already landed, there are things you can do today to make the best of a tough situation.
-
Oil Prices vs Investor Returns: It's What's Beneath the Surface That CountsEngineering, geology and operating discipline can determine the success of oil and gas projects as much as the cost per barrel.
-
Dow Soars 493 Points in Fed-Fueled Bounce: Stock Market TodayNew York Fed President John Williams struck a dovish tone Friday, which eased Wall Street's worries over a potential December pause.
-
Here's What Being in the 2% Club Means for Your RetirementOnly 2% of the population has both a pension and more than $1 million saved. This is a great place to be, but also requires advanced tax planning.
