U.S.-China Tariff Deal and Trump's Visit to the Middle East Boosts the Market: Tech Stocks Lead the Gains, All Three Major U.S. Stock Indices Rise

Taiwan • Business • 05/16 22:55
U.S.-China Tariff Deal and Trump's Visit to the Middle East Boosts the Market: Tech Stocks Lead the Gains, All Three Major U.S. Stock Indices Rise

On May 16, 2025, the US stock market closed higher across the board due to a 90-day tariff suspension agreement reached between US-China and a $200 billion trade agreement as a result of President Trump's visit to the Middle East. The Dow Jones Industrial Average rose by 331 points, the S&P 500 Index closed in the green for the fifth consecutive day, and the Nasdaq Composite rose by nearly 100 points. Tech stocks led the rally, with Tesla and Nvidia stocks rising 17% and 16% respectively this week. However, the US consumer confidence index dropped to its second-lowest level on record, and inflation expectations hit their highest level since 1981, contributing to market uncertainty.

Key Updates

05/19 10:50

AI chips are becoming the new global currency: Bank of America is optimistic about Nvidia and AMD, Saudi Arabia's major order highlights the demand for AI infrastructure

A report by the Bank of America indicates that AI chips are emerging as the "new currency" in global geopolitical and economic negotiations, whose strategic value surpasses that of traditional tech products. Saudi Arabia has entered into multi-billion dollar AI infrastructure agreements with NVIDIA and AMD, and global AI infrastructure spending is expected to reach $6.7 trillion by 2030, with chip designers capturing a $3.1 trillion market share. This "sovereign AI" wave led by the Middle East is reshaping the power dynamics of global technology and capital markets.

05/19 06:51

U.S. stock index futures continue to decline following Moody's credit rating downgrade: Dow futures at one point fell more than 300 points.

On May 19, 2025, Moody's downgraded the U.S. sovereign credit rating from Aaa to Aa1, leading to a decline in U.S. stock futures during the Asian trading session. Dow Jones Industrial Average futures fell by 311 points, S&P 500 futures fell 60 points, and Nasdaq 100 futures declined 278 points. This downgrade sparked market concerns, affecting global stock markets and driving up the prices of safe-haven assets such as gold. U.S. Treasury yields neared 4.5%, becoming a key focus for the market, potentially impacting the flow of funds into the stock market.

05/18 10:17

Key Drivers of U.S. Stock Market Trends This Week: Trump's Tariff Negotiations, Federal Reserve Policy, Economic Data, Computex Taipei, and Corporate Earnings

Last week, the major U.S. stock indices rebounded, with investors focusing on five key variables: the Trump administration's tariff policy and trade negotiations, the Federal Reserve's policy stance, U.S. economic data, technology information from the Taipei International Computer Show (COMPUTEX 2025), and corporate earnings, especially the growth expectations for tech stocks. These factors will influence the short-term trend of U.S. stocks.

05/17 22:17

Moody's downgrade of U.S. debt leads to an increase in yields, as Trump signs a $2 trillion deal during his Middle East trip, boosting AI and prompting a stock market rebound.

On May 16, 2025, Moody's downgraded the United States' sovereign credit rating from "Aaa" to "Aa1," leading the 10-year U.S. Treasury yield to rise to 4.49%, and U.S. stocks were under pressure after hours. President Trump visited the Middle East that same week, signing economic and arms deals exceeding $2 trillion with Saudi Arabia, the UAE, and Qatar, and facilitated cooperation on AI chips, which boosted tech stocks. Despite the short-term volatility caused by the downgrade, the market remained optimistic due to the strong performance of AI and tech stocks.

05/17 14:27

Lisa Shalett, Chief Investment Officer at Morgan Stanley, warns: The rebound in U.S. stocks might be coming to an end, suggesting a shift from technology stocks to the financial and healthcare sectors.

Morgan Stanley Wealth Management's Chief Investment Officer, Xia Leite, warns that the rebound in U.S. stocks is unlikely to be sustained. She advises investors to realize profits from tech stocks and shift towards industries such as finance, energy, and healthcare, which benefit from regulatory easing. She points out that there is a structural shift in the AI sector, with corporate revenues and free cash flows below expectations, constraining the market's upward potential. Xia Leite's view aligns with changes in market fund flows, indicating an increasing preference among investors for defensive and value-oriented assets.

05/16 22:55

U.S.-China Tariff Deal and Trump's Visit to the Middle East Boosts the Market: Tech Stocks Lead the Gains, All Three Major U.S. Stock Indices Rise

On May 16, 2025, the US stock market closed higher across the board due to a 90-day tariff suspension agreement reached between US-China and a $200 billion trade agreement as a result of President Trump's visit to the Middle East. The Dow Jones Industrial Average rose by 331 points, the S&P 500 Index closed in the green for the fifth consecutive day, and the Nasdaq Composite rose by nearly 100 points. Tech stocks led the rally, with Tesla and Nvidia stocks rising 17% and 16% respectively this week. However, the US consumer confidence index dropped to its second-lowest level on record, and inflation expectations hit their highest level since 1981, contributing to market uncertainty.

05/16 21:54

U.S. stocks have rebounded strongly this week: Outstanding corporate earnings, relief from U.S.-China tariffs, and diminished inflationary pressure

In the second week of May 2025, the U.S. stock market rebounded strongly, with the S&P 500 index rising nearly 5% for the week. Driving factors included corporate earnings exceeding expectations, a temporary pause in the US-China tariff war, inflation data indicating reduced pressures, and market expectations of a shift in Federal Reserve policies. However, the technology and semiconductor sectors performed weakly, reflecting the market's conflicting views on the AI boom versus the real economy.

05/16 18:26

S&P 500 Index Rises for Five Straight Days: Eased US-China Trade Tensions and Corporate Mergers and Acquisitions Lift Market Sentiment

On May 16, 2025, the S&P 500 index of the U.S. stock market rose for the fifth consecutive trading day, with a total weekly gain of 4.5%. The rally was driven by a reduction in U.S.-China trade tensions, the merger between Charter and Cox, a depreciating dollar, moderate inflation figures, and expectations of a potential rate cut by the Federal Reserve. Investors moved funds back into riskier assets, and market sentiment warmed.

05/16 09:54

U.S. stocks have risen for four straight days: Market sentiment has improved, but the Federal Reserve warns about the risks of supply shocks.

U.S. stocks continued to rise this week, with the S&P 500 index closing higher for four consecutive days. The Dow Jones index rose over 270 points on May 15, due to the easing of U.S.-China tariffs and improving economic data, which boosted market confidence. Federal Reserve Chairman Powell warned that supply shocks could become more frequent and persistent, highlighting that the market still faces risks. Issues such as supply chain bottlenecks, policy uncertainty, and weak consumer spending remain, urging investors to remain vigilant.

05/16 02:58

In April, the US Producer Price Index (PPI) saw its largest decline in five years, putting pressure on technology stocks, leading to mixed results in the US stock market; the Taiwan stock market closed at 21,730 points, as foreign investors have been net buyers for ten consecutive days.

The U.S. Producer Price Index (PPI) fell by 0.5% in April, marking the largest monthly drop in five years, mainly due to a decrease in service prices, indicating a reduction in inflationary pressures. Following the release of this data, the U.S. stock market showed mixed performance, as the Dow Jones and S&P 500 rose, while the Nasdaq and Philadelphia Semiconductor Index fell. On the 15th, Taiwan's weighted index closed down by 52.62 points to 21,730.25, as foreign investors net bought for the tenth consecutive day, with a single-day net purchase of NT$7.534 billion, accumulating over NT$200 billion in net purchases over ten days.

US-China Tariff Agreement Relieves Market Pressure

On May 12, the US and China issued a joint statement following economic and trade talks in Geneva, announcing a significant reduction of tariffs from as high as 125% to an "equal tariff" level of 10%, and suspending some retaliatory tariff measures for 90 days. The US withdrew the 91% retaliatory tariffs implemented after April 2 and temporarily suspended the execution of 24% of the originally planned 34% equal tariffs. China also simultaneously reduced its imposed tariffs on the US from 34% to 10%, establishing a temporary "equal 10%" tariff benchmark for both parties.

Nevertheless, the actual tariff burden remains significant. According to estimates by Goldman Sachs and the Peterson Institute for International Economics, the effective tariff rate of the US on China remains as high as approximately 39% to 40.7%, with the semiconductor sector reaching as high as 70%. These figures indicate that despite the apparent significant reduction in tariffs, trade barriers still exist in specific industries and subcategories.

Trump's Middle East Visit Brokers Major Economic and Trade Agreements

Meanwhile, US President Trump completed a three-nation tour of the Middle East, visiting Saudi Arabia, Qatar, and the UAE, and brokered economic and trade agreements totaling $200 billion, covering areas such as artificial intelligence, energy, aviation, and military. The White House stated that these agreements will expand investment in the US and enhance the access opportunities for American companies in the Middle Eastern market.

The technology industry emerged as the biggest beneficiary of this visit. NVIDIA announced the sale of over 18,000 Blackwell chips to Saudi Arabia's Humain company, and AMD will also provide chip support. Tesla CEO Elon Musk revealed that Saudi Arabia has approved its satellite network service Starlink for aviation and maritime use and plans to introduce self-driving cars.

Major US Stock Indices Perform Well

Driven by the above positive news, the three major US stock indices closed higher on Friday:

  • The Dow Jones Industrial Average rose 331.99 points, or 0.78%, to close at 42,654.74 points.
  • The S&P 500 Index increased by 41.45 points, or 0.70%, to close at 5,958.38 points, marking the fifth consecutive day of gains.
  • The Nasdaq Index rose 98.78 points, or 0.52%, to close at 19,211.10 points.

For the week, the S&P 500 Index rose 5.3%, the Dow increased by 3.4%, and the Nasdaq Index surged 7.2%, marking one of the strongest weeks of the year.

Tech Stocks Lead the Rally, Tesla and NVIDIA Shine

Tech stocks led the market this week. Tesla (TSLA) shares closed up 2.09% on Friday at $349.98, with a weekly gain of 17%, marking the fourth consecutive week of gains. NVIDIA (NVDA) closed up 0.42% at $135.40, with a weekly increase of 16%. AMD also rose nearly 14% this week, while Palantir and TSMC American Depositary Receipts both gained over 10%.

The Philadelphia Semiconductor Index slightly retreated, falling 10.26 points, or 0.21%, to close at 4,922.19 points on Friday. Component stocks showed mixed performance, with Applied Materials (AMAT) dropping 5.25%, Broadcom (AVGO) falling 1.73%, while AMD and Micron (MU) rose 1.90% and 2.67%, respectively.

Consumer Confidence Declines, Inflation Expectations Hit New High

Despite the strong stock market performance, the latest economic data shows that US consumer confidence continues to deteriorate. The University of Michigan's preliminary consumer confidence index for May fell to 50.8, below April's 52.2 and far below the market expectation of 53.4, marking the second-lowest level in the index's nearly 75-year history.

More concerning is that the one-year inflation expectation surged from 6.5% in April to 7.3%, reaching a new high since 1981. Long-term inflation expectations also rose from 4.4% to 4.6%. The University of Michigan survey indicated that nearly three-quarters of respondents spontaneously mentioned the "tariff" issue, showing that trade policy uncertainty is dominating public perception of the economy.

Federal Reserve Chairman Powell recently warned that rising real interest rates may reflect increased future inflation volatility and hinted that the Fed will re-evaluate its average inflation targeting policy.

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