U.S. stocks surged Tuesday as a delay in contentious U.S.-EU tariffs and calming signals from Japan’s bond markets fueled investor optimism. All three major indexes posted robust gains, with the Nasdaq Composite leading the charge.

A Global Boost for Equities

Markets opened higher amid relief over geopolitical and macroeconomic developments. The Dow Jones Industrial Average climbed sharply out of the gate and remained on an upward trajectory through the day, ultimately closing 740.58 points higher, or 1.78%, at 42,343.60. The S&P 500 gained 118.72 points, or 2.05%, finishing at 5,921.54. Meanwhile, the Nasdaq surged 461.96 points, or 2.47%, to end at 19,199.20.

Investors were buoyed by President Trump’s decision to delay planned 50% tariffs on $108 billion worth of European Union imports until July 9. The move was widely interpreted as a temporary truce, rather than a resolution. “This is a temporary truce, not a peace treaty,” cautioned Holger Schmieding of Berenberg Bank.

Midday Momentum: Trade Optimism Drives Tech and Industrials

Technology stocks led midday gains, particularly semiconductors, which had faced outsized risk from potential tariffs. Relief over supply-chain stability lifted names such as intel and asml. Industrial stocks also participated, though with more caution, given their exposure to aerospace and machinery tariffs. The tariff delay has unevenly benefited sectors underscoring persistent vulnerabilities in pharmaceuticals and automotive industries.

Behind the scenes, trade officials continue to negotiate, but EU Trade Commissioner Maros Sefcovic acknowledged “substantial gaps remain,” with pharmaceuticals, aluminum, and semiconductors still key sticking points.

Later in the session, risk sentiment got another lift from abroad. Japan’s Ministry of Finance took the rare step of surveying primary dealers on long-term bond demand—a move interpreted as a precursor to reduced issuance. This eased pressure on global bond markets, with yields retreating in Japan, Europe, and the U.S. “The questionnaire looks like it is part of a strategy to prepare the market for a temporary scaling back of super long JGB issuance,” a jpmorgan strategist observed.

Lower bond yields globally added to the equity rally, particularly in rate-sensitive sectors. Traders saw the move as decreasing the likelihood of a spike in global interest rates, which had previously weighed on valuations.

Looking Ahead: A Rally on Borrowed Time?

Despite the day’s bullish tone, caution persists. July 9 looms as a potential inflection point for trade policy. “The current rally is real—but so are its limitations,” analysts warned. Should talks falter, the same sectors celebrating today could face renewed volatility. Meanwhile, Federal Reserve policy remains a wildcard, with Chair Jerome Powell previously emphasizing that “tariffs are a significant uncertainty” for the economic outlook.

For now, investors are leaning into the relief—but with one eye on the exit.