[New York Stock Market] All Three Major Indices Rally to Record Highs on Hopes for U.S.-China 'Trade Truce'

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On the 27th (local time), all three major U.S. stock indices rallied and hit record highs, fueled by expectations of a U.S.-China trade truce. Investor sentiment was significantly boosted by the growing possibility that a trade agreement could be reached at the U.S.-China summit scheduled to take place in Busan, South Korea, on the 30th.

On the 27th (local time), traders are seen working and smiling brightly at the New York Stock Exchange (NYSE) trading floor in the United States. Photo by Reuters Yonhap News

On this day at the New York Stock Exchange, the blue-chip Dow Jones Industrial Average closed at 47,544.59, up 337.47 points (0.71%) from the previous trading day. The S&P 500 Index, focused on large-cap stocks, rose 83.47 points (1.23%) to 6,875.16, while the tech-heavy Nasdaq Index soared 432.589 points (1.86%) to finish at 23,637.456. With this, all three major indices set new all-time highs.

The stock market rally was driven by the increased likelihood of a U.S.-China trade agreement. U.S. Treasury Secretary Scott Besant stated after trade negotiations with China in Kuala Lumpur, Malaysia, the previous day, "We have prepared a highly successful framework (a broad agreement) for the leaders to discuss on Thursday (the 30th)." He added that China would suspend rare earth export control measures for one year, and the U.S. would not impose an additional 100% tariff on Chinese goods. Additionally, China agreed to resume imports of U.S. soybeans and support efforts to crack down on fentanyl distribution. Besant also explained that detailed discussions regarding the sale of the U.S. operations of the Chinese video-sharing platform TikTok had been concluded.

U.S. President Donald Trump, speaking to reporters aboard Air Force One en route from Malaysia to Japan, said, "I have great respect for President Xi Jinping of China," and added, "We will reach an agreement."

As the U.S. and China enter a phase of resolving trade tensions, there is a growing possibility that the upcoming summit will result in an agreement to prevent further escalation and manage the conflict through a truce. The U.S. also formalized a series of trade agreements with Malaysia, Cambodia, Thailand, and Vietnam during President Trump's first tour of Asia since his return to office.

Sam Stovall, Chief Investment Strategist at CFRA Research, told CNBC, "If the U.S. and China sign a friendly trade agreement, the world's two largest trading nations will cooperate again, which is a very positive signal." He added, "Many current forecasts for the technology sector exclude China-related profits, so if China is factored in again, it will have a significantly positive impact on the market."

Tobin Marcus, Head of Politics and Policy at Wolfe Research, commented, "The details are limited, and nothing will be finalized before the U.S.-China summit, but the resumption of the truce seems almost certain." He continued, "Overall, this is a better-than-expected outcome, and if the summit goes smoothly, the market will likely be bullish this week."

However, ongoing trade disputes with some countries continue to weigh on investor sentiment. On the 25th, President Trump announced an additional 10% tariff increase on Canadian imports after Ontario, Canada, ran an anti-tariff advertisement quoting former President Ronald Reagan. Negotiations with South Korea have also yet to be finalized due to disagreements over a $350 billion investment package in the U.S. Treasury Secretary Besant stated on the 29th that it is unlikely that tariff negotiations will be concluded at the upcoming U.S.-Korea summit.

The market is also closely watching both the outcome of the U.S.-China summit this week and the Federal Reserve's interest rate decision. The Fed is scheduled to hold its Federal Open Market Committee (FOMC) meeting from the 28th to the 29th to decide on the benchmark interest rate. Last month, the Fed cut the rate by 0.25 percentage points to a range of 4.0% to 4.25%. The Consumer Price Index (CPI) for September rose 3.0% year-on-year, below market expectations of 3.1%, further fueling hopes for a rate cut.

This week will also see major big tech companies-including Alphabet (Google's parent company), Amazon, Apple, Meta Platforms (Facebook's parent company), and Microsoft-announce their third-quarter earnings.

By sector, semiconductor stocks were strong on optimism over a U.S.-China trade agreement. Nvidia jumped 2.81%, Broadcom rose 2.24%, and AMD climbed 2.7%. Qualcomm surged 11.09% after announcing it would launch next-generation artificial intelligence (AI) chips starting next year. Tesla and Apple, both with significant exposure to the Chinese market, rose 4.31% and 2.28%, respectively.

U.S. Treasury yields remained steady. The 10-year U.S. Treasury yield, the global benchmark, held at 3.99%, the same as the previous trading day, while the 2-year yield, which is sensitive to monetary policy, edged up by 1 basis point (1bp = 0.01 percentage point) to around 3.5%.