New York. US stocks surged Monday after the United States and China announced a 90-day truce in their escalating trade war. The agreement, which includes significant tariff reductions, lifted investor optimism, easing fears of a recession and potential product shortages in U.S. stores.

The S&P 500 climbed 2.6 percent in early trading, narrowing its gap to just 5.5 percent from its all-time high set in February. After falling nearly 20 percent below that level last month, the index has rebounded on hopes that President Donald Trump will lower tariffs following trade deals with other nations. The index, a cornerstone of many 401(k) accounts, surpassed its level from April 2, which Trump dubbed "Liberation Day" when he introduced aggressive global tariffs that sparked concerns about a self-inflicted recession.

The Dow Jones Industrial Average surged by 957 points, or 2.3 percent, at 9:35 a.m. Eastern Time, while the Nasdaq composite jumped 3.6 percent.

The rally extended beyond stocks. Crude oil prices rose more than 3 percent, driven by expectations that a less-tariff-strained global economy would demand more fuel. The value of the US dollar strengthened against major currencies like the euro, Japanese yen, and Swiss franc. Treasury yields also rose, as investors adjusted their expectations for the Federal Reserve's interest rate decisions, anticipating fewer cuts than previously expected to shield the economy from tariff-related damage.

While the market responded positively to what one analyst called a "best-case scenario" in the trade talks, the situation remains fluid. The tariff reduction will only last 90 days, allowing time for further negotiations. The US and China agreed to cut tariffs on each other's goods, with the United States reducing tariffs on Chinese products from as high as 145 percent to 30 percent, and China lowering tariffs on US goods from 125 percent to 10 percent. This follows a recent agreement between the US and the United Kingdom to lower tariffs on many British imports to 10 percent.

Despite lingering challenges in the ongoing negotiations, the market mood was upbeat on Monday, with widespread gains across sectors. Apparel companies, heavily reliant on production in China and other Asian countries, saw major jumps. Lululemon surged 10 percent, while Nike rose 7.3 percent. Travel stocks, such as Carnival (up 8.9 percent) and Norwegian Cruise Line (up 8 percent), gained on expectations that lower tariffs would stimulate more travel.

Retailers like Best Buy and Amazon also rose by at least 7 percent, as lower tariffs meant they wouldn't have to pass on high costs to consumers.

International markets also showed positive movement, though with smaller gains than the US Indian stocks surged, with the Sensex rising 3.7 percent after India and Pakistan reached a truce, defusing tensions that had escalated into serious military confrontations. In Pakistan, the KSE 100 soared more than 9%, leading to a brief trading halt after an IMF announcement to disburse a $1 billion bailout package for Pakistan’s struggling economy.

In the bond market, the yield on the 10-year U.S. Treasury rose to 4.45 percent from 4.37 percent late Friday, while the two-year yield increased to 3.99 percent, up from 3.88 percent, signaling that traders now expect fewer rate cuts by the Federal Reserve in response to tariff concerns.

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