Wall Street gains as the first trade agreement is signed

[UNITED STATES] U.S. stocks advanced on Thursday, buoyed by investor optimism over a newly announced trade agreement between the United States and the United Kingdom. Markets also reacted positively to President Donald Trump’s remarks suggesting that upcoming trade discussions with China could be more meaningful than previously anticipated.

The U.S.-U.K. deal marks a notable de-escalation of transatlantic trade tensions, particularly those surrounding tariffs on steel and aluminum. Analysts say the agreement may serve as a model for future negotiations with European allies, as the Biden administration seeks to stabilize trade relations amid continued global economic uncertainty.

Under the new terms, the U.K. will lower tariffs on American goods to 1.8% from 5.1% and expand market access, while the U.S. will maintain a 10% tariff on British imports.

Airline shares surged following news that the deal includes an exemption for Rolls-Royce-manufactured aircraft components from tariffs. The S&P 500 passenger airlines index jumped 5.4%, led by a 7.2% gain in Delta Air Lines.

The exemption is seen as a significant boost for the aerospace sector, which has been grappling with supply chain challenges and cost inflation. Experts say the relief could reduce maintenance expenses for airlines, potentially improving profitability in the near term.

Adding to the sector’s momentum, U.S. Commerce Secretary Howard Lutnick confirmed the U.K. would purchase $10 billion worth of aircraft from Boeing, lifting the aerospace giant’s shares 3.3%, making it the top performer on the Dow.

Meanwhile, President Trump hinted at substantial progress in trade negotiations with Beijing, stating he “wouldn’t be surprised” if a deal emerged from talks set for this weekend.

Investor sentiment has turned cautiously optimistic on U.S.-China relations, with reports suggesting quiet progress on contentious issues such as tariffs and tech restrictions. Still, some analysts remain skeptical, citing the complexity of topics like intellectual property rights and semiconductor export limits.

"The market reacted positively to the U.K. deal. Trump is a showman—he says these talks will be substantive, and maybe they will be. But with him, you never know," said Scott Welch, Chief Investment Officer at Certuity in Potomac, Maryland. "Markets are looking for a reason to breathe easier and avoid a full-blown trade war."

The Dow Jones Industrial Average rose 254.48 points, or 0.62%, closing at 41,368.45. The S&P 500 gained 32.66 points, or 0.58%, to reach 5,663.94, while the Nasdaq Composite climbed 189.98 points, or 1.07%, to finish at 17,928.14.

Consumer discretionary, industrials, and energy sectors led the gains, while healthcare and utilities underperformed. The strength in industrials and energy reflects renewed confidence in a global economic rebound, with reduced trade frictions potentially spurring demand for equipment and energy commodities. Conversely, healthcare stocks lagged amid ongoing concerns over regulatory changes and drug pricing pressures.

The small-cap Russell 2000 index rose 1.9%, hitting its highest level since April 2—the day the original tariff measures were announced. Semiconductor stocks gained 1%, building on a 1.7% advance from the prior session, after a Trump administration spokesperson revealed plans to revise restrictions on the export of advanced AI chips.

In monetary policy, the Federal Reserve held interest rates steady on Wednesday, cautioning about rising risks related to inflation and unemployment, adding uncertainty to the economic outlook.

Traders now see a 60% chance of a 25-basis-point rate cut at the Fed’s July meeting, down from 92% a week ago, according to CME’s FedWatch Tool. On the macroeconomic front, weekly jobless claims fell more than expected, suggesting continued labor market resilience. However, a separate report showed U.S. worker productivity declined in the first quarter for the first time in nearly three years.

Among individual movers, Arm Holdings tumbled 6.2% after issuing weaker-than-expected revenue and profit forecasts. Tapestry shares rose 3.7% after the luxury group upgraded its annual outlook, while Krispy Kreme plunged 24.7% following the withdrawal of its full-year forecast.

Advancing stocks outpaced decliners by a ratio of 1.82-to-1 on the NYSE and 2.15-to-1 on the Nasdaq. The S&P 500 recorded 18 new 52-week highs and five new lows, while the Nasdaq posted 58 new highs and 98 new lows. Trading volume across U.S. exchanges totaled 16.85 billion shares, roughly in line with the 20-day average of 16.86 billion.