Investors betting the U.S.-China trade reprieve marks the end to an all-out tariff war that had threatened to tip the world into a recession sent stocks rallying, while spurring a slide in defensive corners of the market from bonds to gold and haven currencies.

The sharp rebound in risk-appetite drove the S&P 500 up about 2.5% and above Donald Trump’s April 2 “Liberation Day” level. Economically sensitive industries led gains, and an almost 5% jump in a gauge of big techs drove the Nasdaq 100 toward a bull market. Amid a potential reset in inflation expectations, Treasury yields climbed as traders lowered their Federal Reserve wagers to price just two rate cuts in 2025. The dollar hit a one-month high.

Trump said he would likely speak to Chinese leader Xi Jinping later this week following talks between Washington and Beijing to temporarily lower tariffs and de-escalate the trade war. The three-month truce will give the countries time to negotiate a more comprehensive deal on trade.

“No one had these low China tariff rates on their bingo cards. This is a big positive surprise,” said Jeff Buchbinder at LPL Financial. “Risk remains that tariffs go back up from current levels as the pauses end, though taking worst-case scenarios off the table is reassuring.”

The S&P 500 breached its key 200-day moving average. The Nasdaq 100 rallied 3.2%. The Dow Jones Industrial Average added 2.1%. Amazon.com Inc. and Tesla Inc. jumped at least 7%. Trump said he spoke with Apple Inc.’s Tim Cook just as the iPhone maker was reported to be considering price hikes. U.S. pharma shares rebounded as details on the White House policy for drug costs emerged.

The policy-sensitive two-year yield briefly topped 4%, before paring its increase. The yield on 10-year Treasuries climbed six basis points to 4.44%. The Bloomberg Dollar Spot Index rose 0.9%.

“The larger-than-expected drop in the tariffs between the U.S. and China, while temporary, and the establishment of a framework for continued discussion, is exactly what the stock market was hoping to see,” said Carol Schleif at BMO Private Wealth.

To Matt Maley at Miller Tabak, the news of a trade agreement between the U.S. and China is certainly positive for the stock market. The question now is whether this change will be enough to help earnings growth reverse higher in a significant way or not.

“There’s still a very steep hill to climb to get a real agreement,” said Jamie Cox at Harris Financial Group. “The good news is that this pause gives U.S. companies more time to adapt and to plan for contingencies should the trade talks go sideways again. Also, with any luck, the tax package may be across the finish line and investors will no longer have to worry about trade derailing tax.”

With good news on the trade front giving a boost to stocks at the start of the week, it will be up to inflation data, retail sales, and earnings to sustain the momentum, according to Chris Larkin at E*Trade from Morgan Stanley.

“There’s still debate about how much tariffs have already disrupted supply chains and potentially slowed growth,” Larkin said. “While numbers that feed into the stagflation narrative could certainly derail the bullish mood, the economy still appears to be on solid ground, as Jerome Powell noted last week.”

Sentiment toward the U.S. stock market is improving, but it’s too early for investors to sound the all-clear, according to Morgan Stanley strategists.

The team led by Michael Wilson identified four factors needed to sustain a more durable rally, but saw progress in just two: “Optimism around a trade deal with China and stabilizing earnings revisions,” they wrote in a note on Monday.

“The other two items on our checklist — a more dovish Fed and the 10-year yield below 4% without recessionary data — have yet to materialize.”

Federal Reserve Governor Adriana Kugler said the Trump administration’s tariff policies are likely to boost inflation and weigh on economic growth, even with the recently announced reduction in levies on China.

“Trade policies are evolving and are likely to continue shifting, even as recently as this morning,” Kugler said Monday in remarks prepared for an event in Dublin. “Still, they appear likely to generate significant economic effects even if tariffs stay close to the currently announced levels.”

Corporate Highlights:

—Eli Lilly & Co.’s obesity drug Zepbound helped people trim about two inches more off their waists than Novo Nordisk A/S’s Wegovy in the first head-to-head study of the rival medicines.

—NRG Energy Inc. agreed to acquire a fleet of natural gas-fired power plants from LS Power Equity Advisors LLC for about $12 billion including debt, betting the fuel will be crucial to meet electricity demand from data centers.

—CrowdStrike Holdings Inc. Chief Executive Officer George Kurtz disclosed last month that he’d gifted over $1 billion worth of his company’s stock to undisclosed recipients, sharply reducing his influence over the company in an unusual move for a tech founder.

—SoftBank Group Corp.’s plans to invest $100 billion in artificial intelligence infrastructure in the U.S. have slowed, with economic risks stemming from Washington’s tariffs holding up financing talks.

Some of the main moves in markets:

Stocks

—The S&P 500 rose 2.5% as of 12:01 p.m. New York time

—The Nasdaq 100 rose 3.2%

—The Dow Jones Industrial Average rose 2.1%

—The Stoxx Europe 600 rose 1.2%

—The MSCI World Index rose 1.6%

—Bloomberg Magnificent 7 Total Return Index rose 4.6%

—The Russell 2000 Index rose 2.8%

Currencies

—The Bloomberg Dollar Spot Index rose 0.9%

—The euro fell 1.2% to $1.1110

—The British pound fell 0.8% to $1.3193

—The Japanese yen fell 1.9% to 148.09 per dollar

Cryptocurrencies

—Bitcoin fell 1.6% to $102,673.75

—Ether fell 0.8% to $2,491.16

Bonds

—The yield on 10-year Treasuries advanced six basis points to 4.44%

—Germany’s 10-year yield advanced nine basis points to 2.65%

—Britain’s 10-year yield advanced eight basis points to 4.64%

Commodities

—West Texas Intermediate crude rose 2.1% to $62.29 a barrel

—Spot gold fell 2.6% to $3,238.52 an ounce

(With assistance from Margaryta Kirakosian, Sujata Rao, Julien Ponthus, Anand Krishnamoorthy and Vildana Hajric.)

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