A screen displays trading numbers at the New York Stock Exchange at the opening bell on May 12, 2025 in New York City. Photo: VCG

US stocks rallied sharply on Monday after the US and China announced a temporary rollback of reciprocal tariffs, providing much-needed relief to investors concerned about the escalating trade war's economic fallout.

The Dow Jones Industrial Average rose 1,160.72 points, or 2.81 percent, to 42,410.1. The S&P 500 added 184.28 points, or 3.26 percent, to 5,844.19. The Nasdaq Composite Index increased 779.43 points, or 4.35 percent, to 18,708.34. This marked the best day since April 9 for all three US indexes.

China and the US released a joint statement on Monday following the China-US Economic and Trade Meeting in Geneva, announcing several key agreements, most notably a significant reduction in tariffs on both sides, which drew global attention and prompted an immediate and positive market response.

The statement also noted that the two sides will establish a mechanism to continue discussions about economic and trade relations, saying discussions may be conducted alternately in China and the US, or a third country upon agreement of the both sides, and the two sides may conduct working-level consultations on relevant economic and trade issues.

These outcomes serves as a highly positive signal for the restoration of US-China trade relations, with far-reaching implications for markets and the global economy, Pan Helin, a member of the Expert Committee for the Information and Communication Economy under the Ministry of Industry and Information Technology, told the Global Times on Tuesday.

"This is precisely what the market was waiting for," Pan said, noting that the current market surge reflects a classic shift from pessimism to optimism after the trade talk breakthrough and investors quickly moved from deep concerns about tariff wars to positive sentiments, unleashing pent-up market energy.

On Monday, the Dow and S&P 500 have pared their year-to-date losses to just 0.32 percent and 0.64 percent respectively. Market data shows the Nasdaq-100 index, fueled by a rally in mega-cap tech stocks, has surged over 20 percent from last month's lows.

Tech giants rallied with Apple leaping 6.3 percent, Microsoft gaining 2.4 percent, and Nvidia surging 5.4 percent, pushing its market value back above $3 trillion.

Shares of US companies most reliant on Chinese goods saw the biggest gains, with Best Buy closing up 6.56 percent, Dell Technologies rising 7.83 percent, and Amazon jumping 8.07 percent.

Both Chinese and US officials spoke positively about the outcome of the two-day discussions. Chinese Vice Premier He Lifeng said on Sunday that the China-US high-level meeting on economic and trade affairs were in-depth, candid and constructive, according to the Xinhua News Agency.

Speaking to CNBC's Squawk Box, US Treasury Secretary Scott Bessent said he expects to reconvene with Chinese officials in the coming weeks to begin working on a broader, long-term agreement, per a CNBC report.

Asian and European share markets also posted strong gains on Monday, ahead of a scheduled joint announcement by China and the US later in the day.

Asia-Pacific markets broadly closed higher, with Japan's Nikkei 225 closing up 0.42 percent higher, and South Korea's KOSPI rose by 1.17 percent. European stocks also extended their gains, with Italy's FTSE MIB up 2 percent, the Euro Stoxx 50 rising 2 percent, Germany's DAX gaining 1.7 percent.

China's major stock indices opened higher on Tuesday, extending Monday's positive momentum. The Shanghai Composite Index rose 0.5 percent, the Shenzhen Component Index climbed 0.98 percent, and the ChiNext Index rose 1.29 percent.

The ports and shipping sector led gains, with Ningbo Marine Company Limited hitting the daily limit. COSCO Shipping, Ningbo Ocean Shipping, and Lianyungang Port also saw strong openings.

Markets will continue reacting to major developments in China-US and US-Europe trade negotiations. Each new detail will drive market adjustments as the situation evolves, according to Pan.