The Dow Jones Industrial Average rose 212.94 points while the S&P 500 gained 0.8 percent. The Nasdaq Composite rose 1.2 percent. The consumer discretionary sector in the S&P 500 was the best performer, rising more than 2 percent. Amazon and Apple rose 4.3 percent and 1.9 percent, respectively.
Stocks came off their highs in midmorning trading, however. At its high of the day, the Dow had risen nearly 442 points.
“I don’t know why the market rallied on that news,” said Bruce Bittles, chief investment strategist at Baird. “Does it solve any of the long-term issues? I don’t think so. That’s one hurdle the market has to deal with.”
“I can see why the market would be happy that some of the pressure was taken off, but to surge this much?” Bittles said, adding China and the U.S. have yet to address issues like intellectual-property theft and non-tariff barriers of U.S. goods in China.
Futures on oil and copper jumped on hopes a possible new China-U.S. trade agreement would boost global economic growth.
The two leaders, who met for dinner on Saturday at the G-20 summit in Argentina, agreed to hold off on additional tariffs on each other’s goods at the start of the new year to allow for talks to continue. The U.S. agreed to leave tariffs on more than $200 billion worth of Chinese products at 10 percent.
If after 90 days the two countries are unable to reach an agreement, that rate will be raised to 25 percent, according to the White House. Trade negotiations will address forced technology transfer and intellectual property.
“The explicit delay in tariffs is on the positive end of expectations,” said Helen Qiao, China and Asia economist with Bank of America Lynch, in a note to clients. “In contrast to the fear — especially in Asia — that the hawks in US administration would make impossible demands, evidence of President Trump working towards a trade deal with China has emerged.”
Shares of General Motors, Ford and Tesla all jumped more than 1.7 percent after President Trump tweeted that China agreed to cut tariffs on U.S. cars sold into China.
China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%.
Caterpillar and Boeing both jumped 3.3 percent. Chip stocks which have operations in China and a large amount of their sales in the country climbed with Micron and Nvidia each adding more than 2 percent.
Steel stocks also jumped. The VanEck Vectors Steel ETF (SLX) climbed 2.5 percent, while shares of U.S. Steel and AK Steel traded more than 1.9 percent higher apiece.