Dow jumps 900 and S&P 500 climbs 2.4% following a 90-day truce in the US-China trade war

NEW YORK (AP) — U.S. stocks are leaping Monday after China and the United States announced a 90-day truce in their trade war. Each of the world's two largest economies agreed to take down most of its tariffs against the other, which economists warned could start a recession and create shortages on U.S. store shelves.

The S&P 500 was up 2.4% in morning trading and back within 5.6% of its all-time high set in February. The index has been roaring higher since falling nearly 20% below that mark last month on hopes that President Donald Trump will lower his tariffs after reaching trade deals with other countries. It's back above where it was on April 2, Trump's "Liberation Day," when he announced stiff worldwide tariffs that ignited worries about a potentially self-inflicted recession.

The Dow Jones Industrial Average was up 923 points, or 2.2%, as of 10:40 a.m. Eastern time, and the Nasdaq composite was 3.3% higher.

It wasn’t just stocks rising following what one analyst called a “best case scenario” for US-China tariff talks, which reduced tariffs by more than what many investors expected.

Crude oil prices jumped roughly 3% because a global economy less weakened by tariffs would be hungrier for fuel. The value of the dollar climbed against everything from the euro to the Japanese yen to the Swiss franc. And Treasury yields jumped on expectations that the Federal Reserve won't have to cut interest rates so deeply this year in order to protect the economy from the damage of tariffs.

Gold's price fell as investors felt less need to buy something safe.

The move announced Monday could by itself add 0.4 percentage points to the U.S. economy's growth this year, according to Jonathan Pingle, U.S. chief economist at UBS. Every bit counts when the U.S. economy shrank at a 0.3% annual rate in the first three months of the year.

The 90-day reprieve comes at a vital time for the economy, allowing retailers and suppliers to “ensure that shelves are stocked for the all important back-to-school and holiday shopping seasons,” said Carol Schleif, chief market strategist at BMO Private Wealth.

Of course, conditions could change quickly again, as Wall Street has seen all too often in Trump's on-again-off-again rollout of tariffs. Plus, the reduction in U.S. and China tariffs will last only 90 days. That's to give time for more talks following last weekend's negotiations in Geneva, Switzerland, which the U.S. side said yielded " substantial progress."

Until then, a joint statement said the United States will cut tariffs on Chinese goods to 30% from as high as 145%. China said its tariffs on U.S. goods will fall to 10% from 125%. That follows a deal the United States announced last week with the United Kingdom that will bring down tariffs on many U.K. imports to 10%.

Big challenges remain in the negotiations between China and the United States. And economic reports scheduled to be released this week, including on inflation and sentiment among U.S. consumers, could show how much damage the U.S. economy has already taken because of uncertainty about tariffs. But the mood was nevertheless ebullient across Wall Street on Monday, and gains were widespread.

Apparel companies jumped to some of the bigger gains. Lululemon leaped 8.2%, for example. More than a quarter of its fabric came from mainland China last fiscal year, and a reduction in tariffs would mean a less-tough decision on whether to pass on increases to costs to customers or to eat them through reduced profits. Nike rose 7.3%.

Travel companies jumped on hopes that lower tariffs would encourage more customers to fly and feel comfortable enough to spend on trips. Carnival rose 7.5%, and Delta Air Lines climbed 6.3%.

Retailers like Best Buy and Amazon jumped because much of what they sell comes from China and elsewhere in Asia. Both rose at least 6.5%.

In stock markets abroad, indexes rose across most of Europe and Asia, though often by less than the U.S. market.

India's Sensex shot up 3.7% after India and Pakistan agreed to a truce after talks to defuse their most serious military confrontation in decades. The two armies have exchanged gunfire, artillery strikes, missiles and drones that killed dozens of people.

Pakistan’s KSE 100 surged more than 9% and trading was halted for one hour following a spike driven by the ceasefire and an International Monetary Fund decision Friday to disburse about $1 billion of a bailout package for its battered economy.

In the bond market, the yield on the 10-year Treasury jumped to 4.43% from 4.37% late Friday.

The two-year yield, which more closely tracks expectations for what the Fed will do with interest rates, jumped even more. It rose to 3.98% from 3.88% as traders ratchet back expectations for how many cuts to rates the Fed may deliver this year. Many now see just two cuts this year, according to data from CME Group.

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AP Business Writers Matt Ott, Jiang Junzhe and Elaine Kurtenbach contributed.