Dow leaps 1,100 points, S&P 500 rallies 3.3% following a 90-day truce in U.S.-China trade war

Stocks soar as U.S. and China agree to 90-day trade truce, boosting markets and easing recession fears.

Stocks rallied Monday (May 12, 2025) after China and the United States announced a 90-day truce in their trade war. Each of the world’s two largest economies agreed to temporarily take down most of its tariffs against the other, which economists had warned could start a recession and create shortages on U.S. store shelves.

The S&P 500 shot up 3.3% to pull back within 5% of its all-time high set in February. It’s been roaring higher since falling nearly 20% below the mark last month on hopes that President Donald Trump will lower his tariffs after reaching trade deals with other countries. The index at the heart of many 401(k) accounts is back above where it was on April 2, Mr. Trump’s “Liberation Day,” when he announced stiff worldwide tariffs that ignited worries about a potentially self-inflicted recession.

The Dow Jones Industrial Average jumped 1,160 points, or 2.8%, and the Nasdaq composite climbed 4.3%.

It wasn’t just stocks rising following what one analyst called a “best case scenario” for U.S.-China tariff talks, which reduced tariffs by more than what many investors expected.

Crude oil prices climbed because a global economy less burdened by tariffs will likely burn more fuel. The value of the U.S. dollar strengthened against everything from the euro to the Japanese yen to the Swiss franc. And Treasury yields jumped on expectations that the Federal Reserve won’t have to cut interest rates as deeply this year as earlier expected in order to protect the economy from the damage of tariffs.

Gold’s price fell, meanwhile, as investors felt less need to buy something safe.

The move announced Monday (May 12, 2025) could add 0.4% points to the U.S. economy’s growth this year, according to Jonathan Pingle, U.S. chief economist at UBS. That’s a significant chunk, and every bit counts when the U.S. economy shrank at a 0.3% annual rate in the first three months of the year.