US stocks advanced on Monday, recovering from their steepest decline in six months. The S&P 500 rose 1.5%, while the NASDAQ 100 gained 2%. The Dow Jones Industrial Average added 1.3%, supported by strong performances in technology and industrial shares. The Russell 2000 index, which tracks smaller companies, climbed 2.4%, showing renewed investor appetite for risk.
The market rebound followed signals from both Washington and Beijing that they remain open to continuing trade discussions. This development helped ease investor concerns that had triggered last week’s selloff. European and global benchmarks also moved higher, with the Stoxx Europe 600 up 0.4% and the MSCI World Index rising 1.1%.
Broadcom shares jumped nearly 10% after the company announced a multiyear agreement with OpenAI to develop and supply custom chips and networking gear. The deal reinforced confidence in the artificial intelligence sector, which continues to drive gains in large-cap technology stocks.
Market sentiment improved as the US administration expressed willingness to pursue further negotiations with China over trade and export controls. Chinese officials echoed a similar stance, calling for continued dialogue to resolve outstanding issues. The softer tone from both sides helped calm fears of a renewed trade confrontation between the world’s two largest economies.
Geopolitical concerns also eased following the US President Trump’s visit to the Middle East. His appearance coincided with an agreement to halt fighting in Gaza and release hostages held by Hamas. The development reduced near-term market risks associated with regional instability.
Although the tone in markets turned more positive, investors remain cautious. Treasury Secretary Scott Bessent noted that the US still has options for retaliation should China persist with its restrictions on rare earth exports. Traders are watching upcoming economic and diplomatic announcements closely for further direction.
Attention is now turning to the start of the corporate earnings season, with major banks, including JPMorgan Chase, Goldman Sachs, Citigroup, and Wells Fargo, scheduled to release their results this week. Analysts expect substantial trading revenue and deal activity to support earnings, but investors are alert to any signs of weakness.
Market strategists warn that valuations have stretched, with the S&P 500 now trading at about 22 times forward earnings, well above its 10-year average. Analysts say that profit growth will need to remain solid to justify current price levels.
Despite these concerns, historical trends suggest that there is still room for further gains. Data from LPL Financial indicate that bull markets entering their fourth year have historically produced average returns of approximately 12%. With inflation moderating and the Federal Reserve continuing to ease rates, many investors believe the rally could extend, provided corporate earnings remain resilient.
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