Insights 
VT 
US stock indices surged following tariff news between the US and China. The US reduced tariffs on Chinese goods to 30% for 90 days, including a 20% tariff related to fentanyl. This led to increased buying activity, with the S&P and Nasdaq indices recording their second-best days since 2022.
The Dow industrial average increased by 1160.7 points, or 2.81%, to 42,410.10, marking its second-best day since November 2024. The S&P index rose 184.28 points, or 3.26%, reaching 5844.19, also its second-best percentage day since November 10. Meanwhile, the NASDAQ index gained 779.43 points, or 4.35%, at 18708.34, its best day since November 30. The Russell 2000 rose by 16.12 points, or 3.42%, to 2092.19, its best day and second-best since November 2024.
Remarkable Performers
Remarkable performers included Shopify Inc with a 13.71% rise, First Solar at 11.07%, and Block increasing by 9.29%. Additionally, Amazon.com, Meta Platforms, and Micron saw gains of over 7%. Companies like Alphabet and Microsoft also experienced gains, increasing by 3.74% and 2.40%, respectively. Nvidia and Nike recorded increases of 5.44% and 7.34%.
The current market reaction shows a clear response to the temporary softening of trade policy between the United States and China—what appears to be a shift in tone, albeit one flagged with deadlines and still marked by pointed penalties. What the initial text makes plain is that markets are highly sensitive to short-term changes in sentiment from authorities. Once the new tariff reduction was announced, specifically a 30% cap on charges and a 90-day duration that includes a separate, lower rate on fentanyl-related products, traders responded immediately. In short, expectations for corporate performance adjusted rapidly upward, especially among firms with sizable exposure to international supply chains or consumer demand cycles affected by Chinese imports. This gave way to one of the strongest buying sessions seen in nearly two years.
The depth of the move cannot be overstated. All major indices moved in tandem, signalling not just a retail participation response but follow-through from institutional desks. That the Dow jumped over 2.8%, with the S&P and Nasdaq posting over 3.2% and 4.3% respectively, underscores the consistency of this reaction across asset classes. What’s more telling, though, is the mix of leadership within these rallies. We don’t need to go name-by-name to observe that this wasn’t solely driven by semiconductors or energy. Gains spanned solar, digital commerce, consumer discretionary, and data platforms. This breadth points to a broader market conviction that any temporary ease in friction between two large economies can justify a repricing of risk in the short term.
Market Response
For those of us navigating derivatives—particularly direction-based strategies in index or single-name options—this is a period that calls for greater precision in defining duration. Sharp rallies are often chased by volatility spikes when follow-through does not meet initial enthusiasm. Weekly option flows rose in the aftermath of the tariff announcements, reflecting strong opinions on both sides. We’re monitoring this behaviour too: volume has shifted to front-month contracts, and intraday positioning extended into previously subdued names, all based on a 90-day window that starts ticking down now.
There’s also an underlying message here about implied volatility. While the surface-level implieds fell post-announcement, largely due to the pop in price, the implied-to-historical ratios in many of the largest tech stocks remain elevated compared to early 2024 baselines. This tells us that while the market rallied sharply, it hasn’t fully discounted the possibility of renewed pressure. So even as prices moved sharply upward, the options market is not reflecting full confidence in the trend’s durability. In derivative terms, premium sellers are active but still carrying hedges underneath.
Using this data, we’re giving greater weight to short-dated mean-reversion setups in high-beta names. Flow trends from the past sessions suggest professional desks aren’t simply buying into calls—they’re pairing spreads and creating synthetics against core holdings. Outside of the large-cap buying, there’s been a modest rise in skew among weeklies in consumer tech and solar stocks, some of which had outsized gains on the day. This shift matters because it hints at possible limited continuation unless further macro triggers come through.
We’re rotating exposure, not exiting it. Buying across sectors suggests that it wasn’t just a relief rally—it was an attempt to pre-position. But make no mistake: flow alone does not translate to conviction. Many are using tighter stops, and we’re watching the bond market for signs that could contradict this equity optimism. Treasury yields did not fall in a way that supports a soft macro read, and that’s something we need to weigh when considering broader risk calibration.
Put simply—what moved the market wasn’t an ongoing policy change, just a pause. Patience is not weakness in this phase, particularly when volatility premiums still support active hedging and price signals are event-driven rather than momentum-based.
