Wall Street’s main indexes experienced a robust upswing, marking record closing highs for the second consecutive day on Monday. Investor optimism surrounding a potential U.S.-China trade deal, combined with anticipation for high-profile technology earnings and an expected U.S. interest rate cut, fueled the market’s momentum.
With a pivotal meeting scheduled for Thursday between President Donald Trump and China’s President Xi Jinping, the stakes were high as both leaders aim to negotiate a framework that could potentially halt stringent U.S. tariffs and China’s rare-earth export restrictions. This development has alleviated some market concerns regarding a protracted trade war, contributing to a decrease in Wall Street’s “fear gauge,” the VIX, which fell to a near one-month low.
Treasury Secretary Scott Bessent emphasized the discussions around Chinese purchases of U.S. soybeans and rare-earth exports during recent television appearances, following two days of in-depth trade talks in Malaysia. These remarks have played a significant role in bolstering investor confidence in a potential easing of U.S.-China tensions, according to Scott Wren, senior global market strategist at Wells Fargo Investment Institute.
Adding to this optimism, earnings reports from five of the “Magnificent Seven” megacap companies—Microsoft, Apple, Alphabet, Amazon, and Meta—scheduled for later in the week are expected to test the sustainability of the current market rally. This rally has been largely driven by positive outlooks surrounding growth and capital expenditures associated with artificial intelligence. Wren noted that the market is looking for confirmation of revenue and profit contributions from AI investments.
The Dow Jones Industrial Average surged by 337.47 points, or 0.71%, closing at 47,544.59. The S&P 500 rose by 83.47 points, or 1.23%, achieving its first close above the 6,800 mark at 6,875.16. Meanwhile, the Nasdaq Composite soared 432.59 points, or 1.86%, reaching 23,637.46.
In the S&P 500’s 11 major sectors, three showed significant gains. The communication services sector climbed 2.3%, buoyed by Alphabet’s 3.6% rise. The technology sector also advanced by 2%, coinciding with a record close for the Philadelphia Semiconductor Index, which was up 2.7%. Qualcomm stood out within the tech sector, soaring 11% after announcing two new AI chips set for commercial release next year. Additionally, AI chip leader Nvidia contributed notably to the S&P 500’s gains with a 2.8% increase.
Consumer discretionary stocks gained 1.5%, led by Tesla’s 4.3% rise amid hopes surrounding the U.S.-China discussions. However, Christopher Brown, vice president of investments at Synovus, cautioned that Tesla’s rally could be short-lived given the stock’s high valuation, even in light of a favorable trade deal.
Conversely, sectors such as consumer staples and materials lagged, with declines of 0.27% and 0.25%, respectively. U.S.-listed rare earth miners saw a downturn as market sentiments surrounding a U.S.-China agreement reduced worries about supply disruptions that had previously bolstered their sector. Critical Metals plummeted by 13.7%, while NioCorp Developments and Ramaco Resources followed suit with declines of 11.5% and 2.6%.
Shares of U.S.-listed Chinese companies, including Alibaba, JD.com, and PDD Holdings, experienced gains ranging from 2.7% to 3%, with Baidu climbing 4.8%. Recent inflation data further solidified expectations for a 25-basis-point interest rate cut by the Federal Reserve on Wednesday. Investors are also keenly awaiting insights from Chair Jerome Powell regarding potential cuts moving forward, particularly as key economic data releases are hindered by a government shutdown.
Other notable stock movements included Keurig Dr Pepper, which surged 7.6% after raising its annual sales forecast and securing approximately $7 billion to finance its acquisition of JDE Peet’s. Lululemon shares increased by 1.8% following the announcement of a partnership with the NFL. Janus Henderson’s stock jumped 11.3% after confirming acquisition discussions with Trian and General Catalyst.
In a surprising turn, U.S.-listed shares of Argentine companies rose sharply in response to President Javier Milei’s electoral victory, with YPF gaining 23.8%, Grupo Supervielle soaring 48%, and Banco Macro climbing by 37.6%.
Overall, advancing issues outnumbered decliners on the NYSE by a ratio of 1.74-to-1, with 659 stocks reaching new highs and 69 new lows. The Nasdaq similarly showed a positive trend, with 2,593 stocks advancing compared to 2,145 declining. The S&P 500 recorded 37 new 52-week highs and three new lows, while the Nasdaq Composite achieved 132 new highs against 57 new lows. On U.S. exchanges, trading volume reached 19.76 billion shares, slightly below the 20.85 billion moving average of the past 20 sessions.
