U.S. stock markets rallied sharply on Monday as President Donald Trump hinted at de-escalation in U.S.-China trade tensions, with major indices surging on premarket optimism. The Dow Jones Industrial Average futures climbed 0.96%, while the S&P 500 and Nasdaq 100 rose 1.33% and 1.84%, respectively [2]. The Magnificent 7 stocks, including
, , and , led the charge, with surging 3.57% and gaining 2.70%. Investors appeared to dismiss earlier volatility, with the Nasdaq 100 ETF (QQQ) advancing 1.81% to $600.14 [2].
However, Asian markets reacted differently, tumbling amid renewed fears of a trade war. Hong Kong's Hang Seng Index fell 1.7%, while China's CSI 300 dropped 1.3%, reversing recent gains. The sell-off followed Trump's Friday threat to impose 100% tariffs on Chinese imports, reigniting concerns over rare earths and tech supply chains [4]. Analysts warned that Beijing's recent export controls on rare earths and lithium-ion battery components could disrupt global manufacturing, particularly in Japan, South Korea, and Taiwan [5].
The U.S.-China trade war has long been a wildcard for global markets. Mizuho Securities' Sean Darby noted that neither side appears willing to compromise, with Trump's "surprise" escalation catching Beijing off guard. "Markets had priced in détente ahead of a potential Xi-Trump summit, but those expectations have faded," he said [1]. Goldman Sachs warned that the risk of triple-digit tariffs returning has increased, potentially dragging the global economy into a deep recession [1].
Despite the geopolitical uncertainty, U.S. investors focused on corporate earnings and sector rotations. Fastenal Co. (FAST) jumped 2.57% ahead of its earnings report, while Lucid Group (LCID) rose 1.95% after announcing customer deliveries of its Lucid Gravity SUV in Canada [2]. Conversely, Vince Holding (VNCE) fell 3.15% after announcing a stock exchange switch to Nasdaq [2]. Analysts like Kevin Smith of Crescat Capital cautioned that tech valuations have surged past even the dot-com bubble peak, urging a shift to gold and other safe-haven assets [2].
The Magnificent 7's dominance remains a key market driver, though concerns about overvaluation persist. While these stocks accounted for nearly 30% of the S&P 500's market cap in 2025, their forward P/E ratios have declined from early-year peaks, with Apple's dropping from 33.0 to 26.6 . Morgan Stanley analysts argued that cyclical sectors like energy and financials are gaining traction as investors seek growth amid a potential "soft landing" for the economy .
The broader economic implications of U.S.-China tensions are profound. China's expanded rare earth export controls, effective October 9, have already disrupted supply chains, with Japanese and South Korean manufacturers particularly vulnerable [5]. Meanwhile, Trump's 100% tariff threat has pushed the U.S. dollar index to 99.1160, with gold and
surging as investors flee equities [2].
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