The Dow Jones Industrial Average climbed over 280 points, with chip stocks leading the gains as easing US-China trade tensions boosted market confidence.

On May 7, 2025, U.S. stock markets closed higher, with the Dow Jones Industrial Average rising 284.97 points to 41,113.97, a gain of 0.70%. Despite Alphabet's stock price dropping and hawkish signals from Federal Reserve Chairman Powell, the strong performance of chip stocks and the easing of U.S.-China trade tensions boosted the market. The Philadelphia Semiconductor Index increased by 1.74%. The Dow's trading volume was 534 million shares, indicating strong momentum of capital inflow.

Chip Stocks Lead the Rally, Philadelphia Semiconductor Index (PHLX) Rises Over 1.7%

Despite some volatility during Wednesday's U.S. stock market session, major indices ended in the green, driven by strong performance in chip stocks. The Philadelphia Semiconductor Index (PHLX) rose 75.17 points to close at 4,386.36, a gain of 1.74%. NVIDIA and Qualcomm each rose 3%, while AMD gained 1.7% following its earnings report. Market sources indicate that the U.S. government is considering easing export restrictions on AI chips to China, boosting related stocks.

Taiwan Semiconductor Manufacturing Company's American Depositary Receipts (ADR) also rose, closing at $174.54, up 1.31%. This upward trend was reflected in the Asian markets, with Taiwan stock futures rising 135 points and TSMC futures surging 8 points, indicating renewed investor confidence in the semiconductor industry's prospects.

Fed Holds Rates Steady, Powell Signals Caution

The Federal Reserve decided to keep the benchmark interest rate range unchanged at its May meeting, in line with market expectations. However, Chairman Jerome Powell stated at the post-meeting press conference that inflationary pressures remain and noted that if tariff policies remain unchanged, both inflation and unemployment rates could rise. He emphasized that there is no need to rush to adjust interest rate policies, and the Fed will continue to monitor economic data before making decisions.

Despite Powell's hawkish tone, the market reaction was relatively mild. The S&P 500 rose 24.37 points to close at 5,631.28, a gain of 0.43%, while the Nasdaq Composite Index rose 48.50 points to close at 17,738.16, a gain of 0.27%.

Positive Signals from U.S.-China Trade Talks Stabilize Market Sentiment

Improved market sentiment partly stems from the latest developments in U.S.-China trade relations. The U.S. and China are expected to hold high-level trade talks in Switzerland this week, with discussions likely to focus on reducing the current tariffs of up to 145%. Although former U.S. President Donald Trump stated that he is not currently considering actively reducing tariffs, conversations between the Treasury Secretary and Chinese officials have signaled a cooling of tensions.

China has also shown goodwill by announcing a reduction in the seven-day reverse repo rate from 1.5% to 1.4% and implementing several monetary easing measures to stabilize the economy and create a favorable atmosphere for negotiations. These moves have boosted market expectations for improved U.S.-China relations, further driving stock market buying interest.

Trading Volume and Market Momentum Rebound

According to Yahoo Finance data, the Dow Jones Industrial Average's trading volume reached 533,873,373 shares, indicating a significant return of capital. The trading volumes for the S&P 500 and Nasdaq were 3.198 billion shares and 7.351 billion shares, respectively, both above recent monthly averages. Goldman Sachs noted that systematic macro investors' buying momentum continues to strengthen, with last week's purchases reaching $51 billion, and this week's estimate at $57 billion.

Additionally, retail investors have shown strong participation, with April 2023 being the most active month for retail buying since 2017, covering a diverse range of assets including individual stocks and ETFs.

Stock Performance: Divergence Between Disney and Alphabet

In terms of individual stocks, Disney's stock price surged 10%, becoming a major driver of the Dow's rise. The company's second-quarter earnings report exceeded market expectations, with unexpected growth in Disney+ streaming subscribers, and the announcement of a seventh theme park in the UAE further boosted market confidence.

Conversely, Alphabet's share price plummeted 7.5%, limiting the Nasdaq's performance. Apple's announcement of integrating an AI search engine into the Safari browser could threaten Google's position as the default search engine, raising concerns about its advertising revenue prospects.

Forex and Bond Market Reactions

Against the backdrop of the Fed holding rates steady, the yield on the U.S. 10-year Treasury note fell 3.3 basis points to 4.275%. The dollar index strengthened due to expectations of sustained high interest rates. The New Taiwan dollar appreciated by 2.5 cents against the U.S. dollar in the Asian market, closing firmly at the 30 mark, reflecting a trend of capital inflow into emerging markets.

The Dow Jones Industrial Average climbed over 280 points, with chip stocks leading the gains as easing US-China trade tensions boosted market confidence.

Key Updates

The US and UK have reached a historic trade agreement, the US plans to ease AI chip bans to stimulate the market, and the three major US stock indices rise.

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