By Barbara Kollmeyer, MarketWatch , Chris Matthews

Oil rallies, dollar falls as investors snap up so-called risk assets

U.S. stocks rose Monday, but were off the best levels of the session, after the U.S. and China over the weekend called a temporary truce to their trade war, triggering relief buying of perceived riskier assets such as equities.

How are the main benchmarks trading?

The Dow Jones Industrial Average rose 260 points, or 1%, to 25,799.The S&P 500 rose 28 points, or 1%, to 2,789. The Nasdaq Composite Index gained 104 points, or 1.4%, to 7,435.

Stocks were off their highs for the day, as the Dow was up 442 points at its peak, while the S&P was up 40 points, and the Nasdaq had gained as much as 156 points, before each benchmark pared these gains.

Read: A rudderless Fed invites more stock-market volatility, analysts say (http://www.marketwatch.com/story/a-rudderless-fed-invites-more-stock-market-volatility-analysts-say-2018-12-01)

What's driving the market?

A trade standoff between the U.S. and China saw a breakthrough at the (http://www.marketwatch.com/story/us-to-delay-china-tariffs-after-trump-xi-dinner-meeting-at-g-20-in-buenos-aires-2018-12-01)G-20 meeting in Argentina, a gathering that included a highly-anticipated dinner between President Donald Trump and Chinese leader Xi Jinping. The two sides agreed to launch negotiations to reduce trade tensions and discuss forced technology transfer, intellectual-property protection, non-tariff barriers, cyber and agriculture issues, among other concerns.

Read:Tariff truce likely to ease investors' immediate fears, but obstacles linger (http://www.marketwatch.com/story/tariff-truce-likely-to-ease-investors-immediate-fears-but-obstacles-linger-2018-12-02)

(http://www.marketwatch.com/story/tariff-truce-likely-to-ease-investors-immediate-fears-but-obstacles-linger-2018-12-02)And: U.S. and China call a truce in the trade war. Now what? (https://www.barrons.com/articles/trump-china-g20-meeting-1543761501?mod=mktw)

If those talks aren't ultimately successful, planned tariffs on $200 billion of Chinese goods will rise to 25% from the current 10%, an increase that was due to kick in at the start of 2019, but will now be delayed by at least three months. China also said it would buy a "very substantial" amount of U.S. agriculture, energy and industrial goods.

As well, in a late-Sunday tweet (http://www.marketwatch.com/story/trump-says-china-will-reduce-and-remove-40-tariffs-on-us-auto-imports-2018-12-02), Trump said China had agreed to "reduce and remove" tariffs on U.S. cars, now set at 40%.

Trade optimism fed through to other assets with crude oil up 3.2% (http://www.marketwatch.com/story/crude-prices-rally-4-as-russia-saudis-signal-output-curbs-2018-12-03), as investors looked ahead to a meeting of the Organization of the Petroleum Exporting Countries on Dec. 6. Gains came as Russian President Vladimir Putin said over the weekend that his country and Saudi Arabia have agreed to extend a deal to cut output (http://www.marketwatch.com/story/putin-says-russia-saudis-agree-to-renew-opec-production-cuts-2018-12-02). Also for oil, Qatar said it would withdraw from OPEC on Jan. 1, 2019, in announcement Monday (http://www.marketwatch.com/story/qatar-to-pull-out-of-opec-on-jan-1-says-ministry-2018-12-03).

What data are ahead?

Markit released the latest results from its poll of manufacturers, issuing a reading of 55.3, just below the consensus estimate of 55.4, according to FactSet. A reading of at least 50 indicates improving conditions.

The closely watched Institute of Supply Management's PMI gauge rose 59.3, coming in better than economists expecting a reading of 58.0, according to a MarketWatch poll of economists. The reading also was higher than last month's 57.7 report.

At the same time, construction spending in October was 0.1% lower than September, the Commerce Department said, which is weaker than expectations for a rise of 0.3% from September.

What are strategists saying?

"It's frustrating to see the market pullback a bit from the open," said Timothy Chubb, chief investment officer of Univest Wealth Management. "But if you look at last week's impressive rise, you can see that much of the good news was priced in ahead of time," Chubb said, referring to investors generally believing that a pause on new tariffs would be achieved during the Trump-Xi summit.

"In reality, it was never likely that either side was going to back down in their trade disagreements, and upping the ante this close to Christmas would likely have been counterproductive, so the option to maintain the current status quo and defer the 15% increase in tariffs on Chinese goods, due to kick in on January 1 is not only a positive step, but also a fairly easy option to take," said Michael Hewson, chief market analyst at CMC Markets, in a note to clients.

"Who knows, President Xi and the Chinese authorities may pull a rabbit out of the hat through this new negotiating period and promote enough believe that the U.S. trade representatives permanently leave the tariffs on the $200b at 10%, but that is a big if," said Chris Weston, head of research at currency broker Pepperstone, in a note to clients.

But for now, Weston said, the trade development has triggered a "global sigh of relief" for markets. Whether that is sustainable "will be now down to the economic data due through the week and whether OPEC now deliver the goods."

What stocks are in focus?

Auto makers were flying in Monday, after Trump's tweet about tariffs on U.S. autos, with Ford Motor Co.(F) climbing 2.9%, and General Motors Co.(GM) rising 2%%. In Europe, Daimler AG(DAI.XE) rose 4.5%.

Well-known tech and Internet-related names were also rising Monday morning, with Amazon.com Inc.(AMZN) up 4.2%, Apple Inc.(AAPL) climbing 1.8% and Netflix Inc.(NFLX) is up 3%.

Amazon stock is in particular focus, as the firm briefly grew to be America's largest company by market capitalization, surpassing Apple during intraday trade Monday. Microsoft Inc. (MSFT) had briefly taken the title of largest company on Friday (http://www.marketwatch.com/story/microsoft-surpasses-apple-as-most-valuable-us-company-2018-11-30), but as of midday, it ranks third behind Apple and Amazon.

Energy exploration firms are rising Monday, after the reported Putin-Opec agreement sent oil prices higher.

The news has sent crude oil prices rising more than 4%, and the stocks of energy firms have followed. Devon Energy Co(DVN), Marathon Oil Corp. (MRO) and Apache Corp. (APA) shares are all rising at the start of trade Monday.

An easing of U. S-China trade tensions has been bullish for semiconductor companies in particular, as many U.S. firms have heavy exposure to Chinese markets. Qualcomm Inc. (QCOM) stock is up 1.2% at the start of trade, while its one-time acquisition target NXP Semiconductors(NXPI) is rising 2.9%. Micron Technologies Inc. (MU) is rising 3.8% and Nvidia Corp.(NVDA) is surging 3.4%.

Market extras

On Friday (http://www.marketwatch.com/story/us-stocks-poised-to-retreat-as-g-20-summit-gets-under-way-2018-11-30), the S&P 500 index rose 0.8%, to 2,760.17, while the Nasdaq Composite Index added 0.8% to 7,330.54. The Dow climbed 199.62 points, or 0.8%, to 25,538.46.1

Both the S&P 500 and the Nasdaq logged their best weekly performance since December 2011, while the blue-chip index posted its strongest week since November 2016.

The New York Stock Exchange and Nasdaq will close Wednesday (http://www.marketwatch.com/story/what-george-hw-bushs-funeral-means-for-stock-market-bond-traders-commodities-2018-12-03), as a national day of mourning will be held in memory of former President George Herbert Walker Bush. A state funeral will be held the same day, and a moment of silence will also be observed during Monday's trading session.

How were other markets trading?

Asian stocks also rallied (http://www.marketwatch.com/story/asia-pacific-stocks-jump-on-us-china-trade-truce-2018-12-02), with Japan's Nikkei finished 1% higher and the Shanghai Composite Index closing up by 2.6%. European stocks also ended the day higher (http://www.marketwatch.com/story/european-stocks-surge-on-us-china-trade-breakthrough-2018-12-03), with the Stoxx Europe 600 index adding 1%.

Gold prices rose 1% to $1,238.30 an ounce, while the ICE Dollar Index slipped 0.3%.

(END) Dow Jones Newswires

December 03, 2018 13:19 ET (18:19 GMT)