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Wall Street Surges Following US-China Tariff Reduction Agreement

Wall Street Surges Following US-China Tariff Reduction Agreement

Wall Street Surges Following US-China Tariff Reduction Agreement?w=400
In a significant development, Wall Street's three major indices have leapt forward as the S&P 500 reached its highest point since March.
This upwards trend follows the announcement of a temporary reduction in tariffs between the United States and China, offering hope for a de-escalation in global trade tensions initiated by US President Donald Trump in April.

The US and China agreed to a 90-day reduction in tariffs, with the US cutting tariffs on Chinese imports to 30% from an initial 145%, while China's duties on US goods will drop to 10% from 125%. This news has prompted investors to gravitate towards riskier assets, moving away from conservative options, while awaiting clearer long-term outcomes regarding the ultimate stance on tariffs.

John Praveen of Paleo Leon observed that the trade development is easing widespread anxiety, noting a shift towards a more manageable tariff strategy that could mitigate potential fallout. Meanwhile, Chris Brigati at SWBC cautioned that, while current sentiments are positive, the long-term narrative could introduce new challenges.

Since President Trump's initial tariff announcements on April 2, market volatility ensued, only stabilising through additional factors such as a 90-day exclusion for countries beyond China, robust earnings reports, and a US-UK trade agreement. On Monday, key US indices experienced substantial gains, with the Dow Jones climbing 2.81% and the Nasdaq increasing by 4.35%.

With volatility concerns waning, measured by the CBOE Volatility Index dropping below 20, the markets saw increased activity. Notably, sectors like consumer discretionary and technology led in advancements, while only utilities experienced a slight loss. In the tech sector, Apple's shares rose following speculation about potential price increases for upcoming iPhones.

The earnings season continues as Walmart prepares to release its earnings, and energy company NRG saw a significant stock surge following an acquisition announcement valued at $19 billion. Meanwhile, Federal Reserve officials, including Chair Jerome Powell, are set to make public remarks, with traders predicting interest rate cuts by the year's end.

Overall, advancing stocks notably outnumbered decliners across US exchanges, with substantial gains seen in trading volumes compared to averages from recent weeks. This optimistic market reaction underscores the pivotal role of US-China relations in influencing investment strategies and economic outlooks.

Published:Tuesday, 13th May 2025
Source: Paige Estritori

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