Wall Street Today: US Stocks Set for Weekly Gains as S&P 500 Soars 5% on US-China 

Trade Truce

Introduction

Wall Street is closing the week on a resoundingly bullish note, with major U.S. indexes recording significant gains as global markets cheered the unexpected trade truce between the United States and China. After months of tensions, tariffs, and diplomatic deadlock, the world’s two largest economies appear to have taken a step back from the brink — at least temporarily — giving investors a reason to breathe and buy.

The S&P 500 surged 5% over the past five trading sessions, while the MSCI World Index climbed nearly 4%, its best week in recent months. The Dow Jones Industrial Average and the Nasdaq Composite also posted impressive gains of around 4.8% and 5.5%, respectively, as investor sentiment turned decisively risk-on.

US-China Trade Truce: What Happened?

Late Monday, the White House and China’s Ministry of Commerce issued simultaneous statements confirming a mutual agreement to pause new tariffs and resume dialogue. While the specifics remain under wraps, insiders confirm that both sides agreed to temporarily freeze new tariff actions for the next 90 days and re-engage on longstanding trade imbalances, IP protections, and market access.

This development sent a wave of optimism through equity, bond, and commodity markets, reversing weeks of skittish volatility. The truce, albeit temporary and fragile, gave the markets a solid narrative to rally behind.

Market Reaction: Green Across the Board

The S&P 500’s 5% weekly gain marked its best five-day stretch since January, led by a rebound in technology, industrials, and consumer discretionary stocks — all sectors sensitive to trade policy.

• Apple (AAPL) and Nvidia (NVDA) led tech gains, jumping 7.2% and 6.5%, respectively, as fears of supply chain disruption abated.

• Boeing (BA) and Caterpillar (CAT) surged over 6% on hopes of increased export activity to China.

• Amazon (AMZN) and Tesla (TSLA) rebounded sharply, up 5.8% and 7.4%, respectively, driven by risk appetite revival.

MSCI World Index Up 4%: A Global Sigh of Relief

It wasn't just Wall Street. The MSCI World Index, which tracks global equity markets, gained 4%, with strong rallies seen across Asia, Europe, and emerging markets.

• Hong Kong’s Hang Seng jumped 6.1% this week, recovering from months of underperformance.

• Shanghai Composite posted a 3.8% gain, as mainland investors welcomed the trade pause.

• In Europe, the FTSE 100, DAX, and CAC 40 all gained between 2.5–3.5%.

Markets that had suffered the most due to trade exposure — especially in Southeast Asia and Latin America — also staged notable comebacks.

Investor Sentiment: From Caution to Confidence

The shift in sentiment was stark. Just two weeks ago, traders were pricing in higher volatility and weaker earnings outlooks due to intensifying trade hostilities. But this week’s shift has fueled expectations that earnings forecasts may stabilize, and capital expenditure could resume, especially in manufacturing and export-heavy sectors.

The CBOE Volatility Index (VIX), often dubbed Wall Street’s fear gauge, fell from above 18 last Friday to under 14 by Thursday — a clear signal that investors are dialing back downside risk expectations.

Fed Watch: Monetary Tailwinds Still Intact

Adding to the bullishness, the Federal Reserve reaffirmed its dovish stance in Wednesday’s FOMC minutes, stating that rate hikes remain unlikely in the near term given the need to monitor inflation and global risks.

The bond market responded positively, with the 10-year Treasury yield dropping to 4.32% from 4.42% earlier in the week, easing financial conditions. Lower yields, in turn, supported growth stocks and small caps, pushing indices like the Russell 2000 up by nearly 6% this week.

Dollar Weakens Slightly, Supporting Commodities

The U.S. Dollar Index (DXY) weakened slightly amid renewed risk appetite, dropping 0.6%, which provided a tailwind to commodity prices. Gold edged up to $2,370/oz while oil prices surged 3% to $82.5/barrel, reflecting expectations of improved global demand.

Sectoral Breakout: Where the Gains Were Concentrated

Here’s a breakdown of sectoral gains this week on the S&P 500:

The rotation into cyclical sectors suggests growing confidence that economic momentum could strengthen if geopolitical risks subside.

Analysts React: Bullish but Cautious

Market strategists are cautiously optimistic. Morgan Stanley’s Chief Global Strategist, Lisa Shalett, stated, “While this week’s rally is justified by improved sentiment and global coordination, it’s not a full-fledged resolution. Investors must brace for twists in the story.”

Meanwhile, Goldman Sachs upgraded its S&P 500 year-end target to 5,400, citing resilient corporate earnings, lower inflation, and reduced geopolitical shocks.

Still, many on the Street warn that the US-China détente could unravel if either side perceives the other as dragging their feet on key trade issues. The last five years have seen several such truces fall apart — some within weeks.

Retail Participation: Back in the Game

Interestingly, retail investor participation — as measured by Robinhood account activity and TD Ameritrade’s IMX index — saw a 12% uptick this week. Meme stocks like GameStop and AMC saw renewed volumes, while ETFs tracking major indices like SPY and QQQ recorded their highest inflows in over a month.

This signals that retail traders are once again stepping into the rally, encouraged by strong technical momentum and improved headlines.

What’s Next?

While the rally has legs for now, much depends on next week’s economic data and further clarity on trade discussions. Key reports to watch include:

• U.S. Retail Sales (Tuesday)

• Industrial Production (Wednesday)

• China’s Q2 GDP print (Thursday)

• University of Michigan Consumer Sentiment Index (Friday)

In addition, all eyes will be on Treasury Secretary Janet Yellen and Chinese Vice Premier He Lifeng, who are expected to meet next week in Geneva to iron out finer details of the trade roadmap.

A Fragile Euphoria

This week was a textbook example of how rapidly market narratives can shift. Just days ago, the mood was grim, the charts were red, and recession chatter was loud. But thanks to a geopolitical pivot and consistent central bank support, markets found reasons to believe again.

However, optimism must be tempered with realism. The US-China truce is more of a timeout than a treaty. It buys time but doesn’t guarantee peace. Investors would be wise to ride the wave — but with one eye on the horizon.

For now, though, Wall Street is celebrating a week where diplomacy and data aligned just enough to spark one of 2025’s most impressive rallies.