Market expectations for progress in the new round of US-China trade negotiations led to an increase in the major US stock indexes on Tuesday (10th). The S&P 500 index rose by 0.6%, marking its third consecutive day of gains, and is now only down 1.7% from its record high on February 19. The Dow Jones Industrial Average rose by 105.11 points or 0.25%, closing at 42866.87; the S&P 500 climbed by 32.93 points or 0.55% to end at 6038.81; and the Nasdaq Composite gained 123.75 points or 0.63%, finishing at 19714.99. Both the S&P 500 and Nasdaq recorded gains for three consecutive days, while the Philadelphia Semiconductor Index surged 105.84 points or 2.06%, closing at 5242.50.

The economic talks between US and Chinese officials are underway in London, entering their second day. US Commerce Secretary Howard Lutnick expressed hope that the negotiations would conclude on Tuesday evening, but noted they could extend into Wednesday if necessary. Lutnick stated, “I believe the negotiations are going very, very smoothly. We have really put in a lot of time and effort, and everyone is working hard and collaborating closely.”

Traders are closely monitoring this negotiation, hoping both sides can reach an agreement to avoid imposing high tariffs on each other. Last month, the US and China reached a temporary agreement to lower tariffs, which is seen as a significant breakthrough following President Trump's announcement to expand tariffs on imports. Since June, the stock market has been on the rise, sustained by global trade negotiation progress and strong overall market performance. Strong corporate earnings reports and positive news related to artificial intelligence have revitalized technology stocks, which have become the driving force behind this bullish trend.

Jay Woods, Chief Global Strategist at Freedom Capital Markets, remarked, “From a technical perspective, the stock market is stabilizing and has broken through key price levels. Looking longer-term, this week it has surpassed the downward trend line since the start of the year.” Woods added, “This bounce is similar to many tech stocks attempting to return to their previous highs. The good news is that even if this current trend experiences corrections, overall risks and rewards remain attractive, with anticipated support points and entry opportunities.”

However, some investors are concerned that current tariff policies could, in the short term, drive up inflation and consequently weigh on the stock market. Mark Malek, Chief Investment Officer at Siebert Financial, mentioned, “Although the current situation remains unclear, there are still enforceable tariff measures. The Federal Reserve is concerned that the true inflationary effects have yet to materialize. Given the current complex tariff system, we expect to see inflationary signs in items such as automobiles, clothing, and food.”

Market attention is now shifting to the Consumer Price Index (CPI) set to be announced on Wednesday. Economists expect the annual CPI growth rate to rise from 2.3% in April to 2.5%, primarily due to the tariff measures implemented by the Trump administration that have pushed up import prices. HSBC indicated that while global stock markets may continue to rise in the short term, challenges will follow.

HSBC strategist Alastair Pinder noted in a report that the resistance to stock market upward movement is relatively small in the short term. “The US stock market may catch up to other markets, but from a mid-term perspective (longer than six months), the balance of risks and rewards is starting to tilt.” He pointed out that the factors supporting the short-term bullish view include an overall economic environment better than expected, initial tariff impacts being milder than assumed, and low investor participation.

However, he also expressed doubts about whether US stock valuations can maintain a premium over the long term, especially if the Trump administration reinstates tariff-centric policies, which could shake the fundamentals supporting the US stock market. There are also concerns about whether funds will flow from US stocks to overseas markets.

On Tuesday, the World Bank lowered its global economic growth forecast due to tariff uncertainties and ongoing trade disputes, estimating the global economy will grow by approximately 2.3% this year, down from an earlier prediction of 2.7% made in January.