The Dow rallies more than 400 points after Trump and Xi reach trade war cease-fire

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Getty Images / Spencer Platt

  • Global markets rallied Monday, led by automakers and energy stocks.
  • President Donald Trump and Chinese President Xi Jinping reached an agreement to put off plans to more than double the rate on a majority of tariffs against Beijing to 25% on January 1.
  • Watch the major US indices trade in real time here.

Stocks soared Monday after the US and China reached a cease-fire on their trade battle over the weekend, pausing expectations for proposed tariff escalations between the world’s largest economies.

The Dow Jones Industrial Average jumped 1.6%, or more than 400 points. The Nasdaq Composite rose 1.4%, and the S&P 500 was up 1.1%.

At a summit among leaders of the 20 industrialized nations in Argentina on Saturday, President Donald Trump and Chinese President Xi Jinping reached an agreement to at least temporarily put off plans to more than double the rate on a majority of tariffs against Beijing to 25% on January 1. With a 90-day deadline, market watchers are cautiously optimistic.

“This concludes only one battle so the trade war should linger on next year,” said Mark McCormick, a strategist at TD Securities. “Still, positioning and valuation are critical factors that could see risk assets extend the rally into year-end.”

Early Monday, Trump said on Twitter that China would reduce duties on American cars. Automaker shares jumped following the tweet, with Ford and General Motors both gaining close to 3%. European automakers BMW (+4.8%) and Daimler (+4.5%) also gained. Officials in Beijing didn’t immediately confirm or deny the assertion, the Wall Street Journal reports.

Semiconductor companies that have the large sales exposure to China – including AMD (+7.5%), Nvidia (+5%) and NXP Semiconductors (+3.5%) – were also sharply higher following the detente.

Oil prices rallied more than 5% after shedding nearly a quarter in value last month, with West Texas Intermediate trading around $53.30 per barrel and Brent just under $62. Saudi Arabia, OPEC’s de facto leader, and Russia agreed over the weekend to cut coordinated production levels at a broader meeting among major producers this Thursday and Friday.

John Stoltzfus, chief investment strategist at Oppenheimer Asset Management expects a resolution between the US and China would be conducive to an extended rally in oil prices – albeit not too much above the levels seen prior to the decline that began in October.

“However, the deeper into the 90 days of the truce period talks between the US and China run without resolution, the less likely we believe that a significant rally in oil prices can persist,” he said.

Wall Street followed rallies in markets around the globe. Across the Atlantic, automakers helped lift the Stoxx 600 1.3%. In Asia, the Shanghai Composite gained more than 2.5% and the Nikkei 225 was up 1%.

Also over the weekend, former President George H.W. Bush died at 94. The New York Stock Exchange and the Nasdaq will close Wednesday, which Trump has designated a national day of mourning for the 41st president.