Wall Street heads higher after Trump softens criticism of China

NEW YORK (AP) — And the backup is coming to Wall Street. U.S. stocks rebounded Monday after President Donald Trump said “everything will be fine,” just days after shaking up the market by threatening to tax China much more.

The S&P 500 jumped 1.6% on its best day since May and recovered just over half of its Friday decline. The Dow Jones Industrial Average climbed 587 points, or 1.3%, and the Nasdaq composite jumped 2.2%.

“Don’t worry about China,” Trump said on his social media on Sunday. He also said that Chinese leader Xi Jinping “does not want depression for his country, and neither do I.” The United States wants to help China, not hurt it!!! »

It’s a sharp turnaround from the anger Trump showed on Friday, when the S&P 500 fell to its worst decline since April after he accused China of “moral disgrace in its relations with other nations.”

Trump pointed to “an extremely hostile letter” from China outlining restrictions on exports of rare earths, which are materials used in making everything from personal electronics to airplane engines. Trump said at the time that he could impose an additional 100% tax on imports from China starting November 1.

For its part, China has urged the United States to resolve its differences through negotiation rather than threats. “We do not want a tariff war, but we are not afraid of it,” the Commerce Ministry said in a statement posted online.

Hours later, Trump posted his less confrontational speech on China on Truth Social. The backlash of anger, which also occurred before trading began on Wall Street, raised hopes that the world’s two largest economies could find a way to allow global trade to continue smoothly.

The market’s movements up and down echoed its manic swings in April. That’s when Trump shocked investors with his “Liberation Day” announcement of global tariffs, only to give in to many who gave them time to negotiate trade deals with other countries.

If this period ends the same way, potentially even after a sharp drop in stock prices, easing trade tensions and uncertainty could allow a continued recovery to continue through 2026, according to Morgan Stanley strategists led by Michael Wilson.

Sure, the U.S. stock market may have been ready to fall. The company was already facing criticism that prices had soared too high following a torrid 35% rise in the S&P 500 from its April low. The index, which dictates the movements of many 401(k) accounts, is still near its all-time high set last week.

Not only has Trump’s abandonment of tariffs helped stocks soar since April, but so have expectations of several interest rate cuts from the Federal Reserve to support the economy.

Critics say the market now appears too expensive, with prices having risen much faster than corporate profits. Concerns are particularly strong around companies in the artificial intelligence sector, where pessimists hear echoes of the implosion of the 2000 dot-com bubble.

Broadcom jumped 9.9% for one of the biggest gains in Monday’s S&P 500 after announcing a collaboration with OpenAI. Broadcom will help develop and deploy custom AI accelerators that ChatGPT maker will design.

For stocks to appear cheaper overall, either prices must fall or company profits must increase.

That raises the stakes for the upcoming earnings reporting season, with major U.S. companies lining up to say how much profit they made over the summer. JPMorgan Chase, Johnson & Johnson and United Airlines are among the big names on the upcoming week’s calendar.

Fastenal fell 7.5%, the biggest loss in the S&P 500 after the maker of fasteners and safety supplies reported profit for the latest quarter that was slightly below analysts’ expectations.

Overall, the S&P 500 rose 102.21 points to 6,654.72. The Dow Jones Industrial Average climbed 587.98 to 46,067.68, and the Nasdaq composite rose 490.18 to 22,694.61.

At Bank of America, strategist Savita Subramanian is optimistic that S&P 500 companies can generate greater overall profit than analysts expect. In addition to reports showing a resilient U.S. economy, she also highlighted in a BofA Global Research report how the weakening of the U.S. dollar against other currencies increases the value of large U.S. companies’ sales made abroad.

In foreign stock markets, indexes rose slightly in Europe after losses in Asia, which had its first opportunity to react to Trump’s threat on Friday of additional tariffs on China.

Shares fell 1.5% in Hong Kong and 0.2% in Shanghai.

China reported that its global exports rose 8.3% in September from a year earlier, the strongest growth in six months and further evidence that its manufacturers are shifting sales from the United States to other markets.

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AP Business writers Matt Ott and Elaine Kurtenbach contributed.