Stocks Surge as U.K. Trade Deal, China Tariff Hopes Spark Risk-On Rally; Tech, Crypto, and Cyclicals Lead

The S&P 500 rose 0.61% to 5663.94, the Dow Jones Industrial Average gained 315 points (0.77%), and the Nasdaq Composite led with a 1.07% jump to 17,928.14. The rally extended Wednesday’s momentum as investors cheered a new U.S.-U.K. trade deal and signs of potential de-escalation in U.S.-China tariffs. The Russell 2000 and high-beta stocks outperformed, reinforcing a risk-on tone across equity markets.

Top Market Drivers: Trade Deals, Tariff Chatter, and Political Headlines Markets took cues from President Trump's announcement of a trade pact with the U.K., which includes relaxed tariffs on steel, aluminum, and automobiles. The agreement is the first step in what the White House signaled could be a broader series of deals. Trump also indicated that tariffs on Chinese goods could be lowered if this weekend’s meetings with Chinese officials go well, injecting further optimism.

Geopolitical developments added intrigue. German Chancellor Merz and President Trump reportedly agreed to prioritize resolving U.S.-EU trade disputes, and Trump also floated changes to tax policy—supporting higher top tax rates and closing the carried interest loophole—in a call with House Speaker Mike Johnson. Meanwhile, Bloomberg reported potential revisions to the SALT deduction cap, raising it to $30,000.

Sector Performance: Tech, Travel, and Energy Take Off Ten of eleven S&P sectors closed higher, with the biggest gains in:

• Consumer Discretionary (+2.4%) – Powered by reopening momentum and favorable tariff implications.

• Industrials (+2.3%) – Boosted by Boeing's $10B jet deal with the U.K.

Energy (+2.2%) – Lifted by rising oil prices and optimism over global trade flows. Defensive sectors underperformed, with Health Care (-0.1%) and Utilities (+0.2%) lagging, as investors rotated into higher-beta names.

Macro Highlights: Treasuries Hit, Yields Surge on Weak 30-Year Auction Treasury yields moved sharply higher. The 30-year yield rose to 4.85% after a weak $25B auction drew the lowest foreign participation in six years. The 10-year yield climbed eight basis points to 4.38%, while the 2-year rose to 3.85%. A disappointing productivity report and surging unit labor costs (+5.7%) reinforced inflation concerns, pressuring bonds.

Commodities: Crude Rallies on Trade Optimism WTI crude gained 3.2% to settle at $59.94 per barrel, while Brent added 2.8% to $62.84. Gasoline and heating oil also rose 3%, aided by strengthening refining margins. Gold (GLD) fell 1.96%, as investor appetite for safe havens waned. Natural gas edged down slightly.

Notable Movers: Crypto, Semis, Meme Stocks Pop

• ETHE (+18.4%) and BITO (+5.8%) surged as crypto enthusiasm returned.

• ARKK (+3.8%), TAN (+3.8%), and KRE (+2.5%) led in high-growth and cyclical spaces.
• Semiconductors (SOX) gained 2.4% amid reports the U.S. will revoke its AI chip export “diffusion” rule.

Late-Day Action: VIX Spike Cools Rally Markets pulled back slightly into the close after a large VIX option trade—targeting May 21 and July 16 $35 strike calls—triggered defensive flows. While not enough to reverse the session’s gains, it served as a reminder that volatility remains just under the surface.