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Stocks close higher as trade conflict with China cools

CNBC logo CNBC 5/21/2018 Fred Imbert ad Sam Meredith
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Stocks ended higher Monday as trade tensions between the U.S. and China dissipated for the moment, while investor sentiment was also boosted by a slew of dealmaking activity.

The Dow gained 298 points, with Boeing, Caterpillar and General Electric leading. The index also topped 25,000 for the first time since mid-March.

The S&P 500 added 0.75 percent as industrials jumped. The Nasdaq climbed 0.55 percent as semiconductors pushed higher.

Treasury Secretary Steven Mnuchin later said over the weekend the prospect of a trade war was on hold after an agreement to suspend tariff threats.

On Saturday, negotiators from the world's two largest economies said they would continue talking about measures under which Beijing would import more energy and agricultural commodities from the U.S. in an effort to bridge the $335 billion annual U.S. goods and services trade deficit with China.

"This should offer investors some relief over trade concerns," said Bruce Bittles, chief investment strategist at Baird. "However, we expect that trading jitters will continue as the U.S. still has plans to apply steel and aluminum tariffs on the European Union by month-end."

Mnuchin told CNBC on Monday the U.S. has made "very meaningful progress" with China on trade matters. "Now it's up to both of us to make sure that we can implement it," Mnuchin told "Squawk Box."

Trump touted the deal, tweeting: "China has agreed to buy massive amounts of ADDITIONAL Farm/Agricultural Products - would be one of the best things to happen to our farmers in many years!"

Futures rose sharply on the news as worries of a trade war between the two countries in the world decreased. Trade tensions between the U.S. and China kept a lid on stocks last week, as the major indexes slipped.

"In our view the fundamentals remain attractive for further upside in equities stateside and globally in the months ahead so long as progress persists in trade talks with China," said John Stoltzfus, chief investment strategist at Oppenheimer Asset Management.

Wall Street also got a boost Monday amid a slew of dealmaking news.

General Electric will merge its transportation business with Wabtec — a rail equipment maker — in a deal worth $20 billion. GE shares rose 3.5 percent.

Meanwhile, Fifth Third Bancorp agreed to buy MB Financial for $4.7 billion in cash and stock. MB Financial shares surged 14 percent.

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