Market Rebounds as Trade Fears Ease; Tech and Small Caps Lead the Way

U.S. stocks rebounded sharply on Monday, with the S&P 500 gaining 1.6%, the Nasdaq Composite up 2.2%, and the Dow Jones Industrial Average rising 1.3%, as easing trade tensions between the U.S. and China fueled broad-based buying. The rally helped major indices recover roughly half of Friday’s steep losses.

The turnaround followed conciliatory comments from President Trump, who moved to calm fears after last week’s tariff threats, assuring on Truth Social that “it will all be fine.” Treasury Secretary Scott Bessent added that dialogue with China had resumed and that a meeting between Trump and President Xi was still expected soon.

That reassurance sparked a strong recovery across sectors and market caps. The Russell 2000 surged 2.8% and the S&P Mid Cap 400 climbed 2.0%, reflecting renewed risk appetite.

The information technology sector (+2.5%) led the advance, powered by a 4.9% jump in the PHLX Semiconductor Index. Broadcom (AVGO) rallied 9.9% after announcing a 10-gigawatt AI accelerator collaboration with OpenAI, while NVIDIA (NVDA) gained 2.8% after revealing new partnerships with Meta Platforms (META) and Oracle (ORCL) to expand AI infrastructure.

Strength in mega-cap names drove additional upside in consumer discretionary (+2.3%) and communication services (+1.8%), led by a 5.4% surge in Tesla (TSLA). The Vanguard Mega Cap Growth ETF rose 1.9%, helping the market-weighted S&P 500 (+1.6%) outperform the equal-weighted version (+1.0%).

Banks also joined the rally ahead of their earnings reports, with Goldman Sachs (GS), JPMorgan Chase (JPM), and Citigroup (C) all up more than 2%. Retailers that rely on Chinese imports—Best Buy, Burlington, and Ross Stores—saw outsized gains. Meanwhile, quantum computing stocks surged after IonQ (IONQ) hit record highs on a breakthrough in quantum simulations.

Defensive groups lagged, with consumer staples (-0.4%) and health care (-0.1%) the only declining sectors, pressured by a pullback in Eli Lilly (LLY). Fastenal (FAST) was the day’s worst S&P 500 performer, falling 7.5% after missing earnings expectations.

With bond markets closed for Columbus Day and few macro catalysts in play, the session was defined by a powerful reversal from last week’s risk aversion. While trade optimism provided relief, upcoming bank earnings will now set the tone for whether this rebound can extend into the heart of earnings season.

Our FTinvest 11 model portfolio rebounded firmly on Monday, rising 0.96% to close at 833.29, as improved sentiment in global markets helped lift most portfolio components. The advance followed last week’s steep losses and marked the first strong upside session since the recent selloff.

Early strength carried through the afternoon, supported by gains in both growth-oriented and cyclical holdings. Technology and consumer discretionary names led the recovery, echoing the upbeat tone seen across Wall Street, while energy and materials posted more modest gains.

The index benefited from renewed appetite for risk assets after signals of easing trade tensions between the U.S. and China helped calm investors’ nerves. Several top-weighted names in the FTinvest 11 basket posted outsized rebounds, reversing part of last week’s declines.

Despite lingering volatility in global markets, today’s performance signaled a potential stabilization following the sharp correction. Momentum now shifts toward whether the index can build on this recovery through the remainder of the week, particularly as corporate earnings season begins to pick up and macro sentiment remains fluid.