In New York, U.S. stocks displayed subtle changes on a placid Monday, coinciding with the commencement of trade talks between the two globally dominant economies. These discussions aim to stave off a potential recession.
The S&P 500 inched up by 0.1%, edging closer to its previous high set in February by 2.3%. Meanwhile, the Dow Jones Industrial Average marginally declined by 1 point, less than 0.1%, while the Nasdaq composite experienced a 0.3% increase.
Representatives from the U.S. and China gathered in London to deliberate on various disputes isolating the two nations. The objective is to ultimately reach an agreement that will reduce the substantial tariffs currently frozen, facilitating the uninterrupted flow of goods ranging from small tech devices to large machines.
Optimism surrounding President Donald Trump’s potential reduction of tariffs, following successful trade agreements with other nations, has been a pivotal factor contributing to the S&P 500’s substantial rally. This recovery follows an approximate 20% drop from its peak two months prior, recovering past the position where Trump had previously shaken financial markets with a broad-spectrum tariff proclamation on what was termed “Liberation Day.”
According to strategists from Deutsche Bank, Parag Thatte and Binky Chadha, this episode may constitute the briefest downturn following an episode of increased volatility on record. Generally, stocks take roughly two months to stabilize after a volatility spike, followed by four to five months to regain losses. However, this time, stocks nearly completed this cycle in under two months.
Despite this progress, uncertainties remain, rendering trading on Wall Street relatively subdued at the start of the week.
Significant market movements stemmed from the announcement of substantial acquisitions. Qualcomm surged 4.1% following its agreement to acquire Alphawave Semi in a transaction valued at $2.4 billion. Concurrently, IonQ advanced 2.7% after announcing its plan to purchase Oxford Ionics for about $1.08 billion.
Conversely, Warner Bros. Discovery experienced a reversal from a substantial early gain to a 3% loss following its announcement to bifurcate into two entities. One arm will retain Warner Bros. Television, HBO Max, and related studio brands, while the other division will manage CNN, TNT Sports, other global entertainment, sports, and news media brands, along with certain digital products.
Tesla showed signs of recovery after experiencing a steep decline recently. The electric vehicle firm faced turbulence last week due to Elon Musk’s disintegrating affiliation with Trump. On Monday, Tesla rebounded 4.6%, oscillating between gains and losses earlier.
This strained connection may potentially impact Musk’s other enterprises that hold U.S. government contracts, including SpaceX. Conversely, Rocket Lab, a space company poised to capitalize on this, climbed 2.5%.
In conclusion, the S&P 500 augmented by 5.52 points to reach 6,005.88. The Dow Jones Industrial Average marginally decreased by 1.11 to 42,761.76, while the Nasdaq composite climbed by 61.28 to 19,591.24.
Internationally, stock indexes were marginally lower across Europe, contrasting with gains in much of Asia.
Chinese markets advanced despite reports indicating a slowdown in exports, growing 4.8% year-over-year in May, following an over 8% jump in April. Concurrently, consumer prices in China dropped by 0.1% in May compared to the previous year, marking the fourth month of consistent deflation.
Hong Kong stocks surged by 1.6%, while shares in Shanghai experienced a 0.4% rise.
In the bond sector, the 10-year Treasury yield dipped to 4.48% from 4.51% at the end of the previous week. This decrease followed a survey by the Federal Reserve Bank of New York, which found a slight easing in consumers’ expectations for imminent inflation in May.
This presents some alleviation for the Fed, which is maintaining its benchmark interest rate pending the assessment of the impact of Trump’s tariffs on inflation and the broader economy. Persistently rising inflation expectations among U.S. households could foster behaviors generating a cycle that exacerbates inflation.
Economists anticipate the upcoming report on Wednesday to reveal an acceleration in national inflation rates last month, rising to 2.5% from 2.3%.