Wall Street rallies on surprise breakthrough in U.S.-China trade talks; bond yields rise, oil and tech lead the charge.
Commentary from the trading desk at Stipelis for May 12, 2025.
Markets Surge as U.S. and China Slash Tariffs, Setting the Stage for Reset.
Wall Street is starting the week with a bang, following news of a breakthrough in U.S.-China trade talks that sent equities soaring and reset the narrative around global risk.
After marathon weekend meetings in Geneva, both sides agreed to drastically reduce tariffs—President Trump’s reciprocal tariff on China will fall to 10% from 125%, with China matching the cut on U.S. goods. While a separate 20% tariff over fentanyl issues remains, the move signals a pivot from economic confrontation to negotiation.
The Dow Jones surged 2.46%, the S&P 500 Emini gained 2.76%, the Nasdaq jumped 3.4%, and the Russell 2000 climbed 3.22%.
According to the Wall St. Journal, shares punished during the trade war, like Amazon, Apple, and Tesla, rebounded sharply. Analyst Dan Ives dubbed the deal a “best-case scenario,” while President Trump hailed it as a “total reset.”
Treasury yields continued their rise, reflecting both rising risk appetite and fading rate-cut bets. The 10-year yield closed at 4.37%, up 12 basis points, while the two-year treasury ticked up basis points for the week to 3.882%.
The Stipelis bond index moved lower, down 0.25% on the week, as investors adjusted to a steepening yield curve and re-priced growth expectations.
Commodities also rallied. The Stipelis Crude Oil Index climbed 2.57%, reversing earlier weakness. WTI closed the week up 4.7% at $61.02/barrel.
Energy markets found tailwinds in both the tariff truce and a surprise U.S. inventory draw.
The Stipelis Energy Complex indicator was the week’s top-performing sector for Stipelis
Despite the upbeat market tone, the Fed held steady. The FOMC kept rates at 4.25%-4.5% at the FOMC meeting on Wednesday, citing increased uncertainty and a balanced risk outlook.
Inflation remains elevated, but employment is solid. While not closing the door on future hikes, the Committee emphasized flexibility, data dependency, and its dual mandate.
Looking ahead, attention turns to April CPI data and continued developments in U.S.-China negotiations. If the 90-day tariff reduction window yields a broader deal, this week’s rally may have legs. However, with inflation still sticky and monetary policy tight, the path forward remains far from clear.
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The opinions expressed are those of Stipelis Global Trading LLC and are considered market commentary. They are not intended to act as investment recommendations. Individuals should make investment decisions based on their own analysis and with direct consultation with a financial advisor.
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