S&P 500 rallies 1%, on pace for first close above 6,800 ever on potential China trade truce

Stocks jumped to new records on Monday after U.S. and China officials cooled tensions over the weekend, laying the groundwork for President Donald Trump and China President Xi Jinping to clinch a trade deal this week.

The S&P 500 climbed about 1%, while the Nasdaq Composite was up 1.7%, bolstered by a rise in Nvidia and other chip stocks. The Dow Jones Industrial Average rallied 186 points, or 0.4%. All three major averages notched fresh all-time intraday highs in the session.

“I think we have a very successful framework for the leaders to discuss on Thursday,” said Treasury Secretary Scott Bessent from the ASEAN Summit in Kuala Lumpur, Malaysia.

The framework potentially includes a delay of China’s rare earth export restrictions that caused the latest trade flare-up, the withdrawal of Trump’s threatened 100% tariffs on China that were set to start Nov. 1, and a resumption of Chinese purchases of American soybeans. The agreement may also include a resolution of the TikTok dispute, with the U.S. getting a deal for the domestic version of the social video app.

“I have a lot of respect for President Xi, and we are going to come away with the deal,” Trump said on Monday from Air Force One.

Chipmakers, the sector with the most to lose from tensions with China, supported the rally Monday. Nvidia rose more than 2%, while Broadcom gained more than 1%. Tesla and Apple also added more than 5% and 1%, respectively, with the latter nearing $4 trillion in market cap.

Qualcomm reached a new all-time high after the company announced new artificial intelligence chips, putting it in competition with Nvidia and AMD. The stock was last up more than 11%.

“If we end up with some sort of a favorable trade agreement between the U.S. and China, then the two largest trading partners are once again working together. That would also be a very positive sign,” Sam Stovall, chief investment strategist at CFRA Research, told CNBC. “A lot of the forecasts for technology have been without the benefit of China, so once you can add China back into the equation, that would probably be fairly optimistic for the markets.”

Big Tech companies’ upcoming earnings reports are on tap, with several “Magnificent Seven” stocks, including Alphabet, Amazon, Apple, Meta Platforms and Microsoft, set to release their third-quarter results this week. Investors also expect the Federal Reserve to reduce its benchmark interest rate on Wednesday, particularly after the Bureau of Labor Statistics released slightly cooler-than-expected inflation data last week.