Markets Surge to 2025 Highs Amid U.S.-China Tariff Pause

Monday, May 12, 2025

Today, markets experienced one of their most robust sessions of 2025. The year has been volatile, and while fluctuations may persist, today’s impressive gains have brought the S&P 500 within 5% of its all-time trading high. Both the Dow and the S&P 500 are now within 1% of achieving year-to-date profits.

The Dow rose by 1,160 points, marking a +2.81% increase, although it was the laggard among major indices. The S&P 500 increased by +184 points, equivalent to +3.26%. The Nasdaq led the day, buoyed by tech stocks, with a notable increase of +779 points, or +4.35%. Additionally, the small-cap Russell 2000 gained +68 points, up +3.40%.

A key factor driving this market shift is the agreement between the U.S. and China to pause reciprocal tariffs, which had reached +145% on Chinese imports to the U.S. and +125% on U.S. exports to China. Major stocks like Amazon (AMZN) and Meta Platforms (META) both saw significant gains of +8% today, leading the “Magnificent Seven” stocks.

Chinese stocks also rebounded, with Hong Kong’s Hang Seng index appreciating by +3%, marking its best trading day since March. Meanwhile, the U.S. Dollar has climbed back to a one-month high, and Gold, which served as a hedge during recent market declines, fell by -3% today.

Upcoming Insights: Consumer Price Index Report

Tomorrow’s major event, likely less impactful than today’s tariff developments, is the Consumer Price Index (CPI) report for April. Analysts expect the headline month-over-month CPI to show a swing to +0.2%, compared to -0.1% from the previous month. Core CPI is projected at +0.3%, an improvement over March’s +0.1%. Year-over-year, the headline CPI is expected to hold steady at +2.4%, with core CPI also remaining stable at +2.8%.

If these figures align with expectations, they will still exceed the optimal inflation levels targeted by the Federal Reserve. The market’s strength and the ongoing absence of significant economic issues stemming from tariffs suggest that interest rate cuts may remain unlikely for the immediate future. As a result, the probability of a rate cut in June has plummeted from 64.4% to 8.1%. Currently, the most likely timeline for the first rate cut of 2025 is set for the September meeting.

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