U.S. stock benchmarks Monday afternoon traded off their loftiest levels of the session but still retained solid gains, as investors applauded easing trade animosities between the U.S. and China.

What are markets doing?

The Dow Jones Industrial Average rose 305 points, or 1.2%, to 25,020, on track for its biggest one-day percentage gain since April 10, as well as its highest close since March 12.

The S&P 500 rose 21 points to 2,733, a gain of 0.8%. All 11 primary S&P 500 sectors were higher, with industrials—the sector with some of the highest correlation to trade issues—up 1.4%. The benchmark index was on track for its highest close since around March.

The Nasdaq Composite Index rose 43 points, or 0.6%, to 7,396. The index was supported by a rally in technology stocks, which rose 1.2% on the day.

The small-cap benchmark Russell 2000 index rose 0.6% and hit its latest in a series of records.

What’s driving the market?

The mood was upbeat after Treasury Secretary Steven Mnuchin said over the weekend that the Trump administration would delay implementation of tariffs on Chinese goods and “put the trade war on hold” while working out details of a deal between the countries.

Hours later, a conflicting statement was released by U.S. Trade Representative Robert Lighthizer, who said Washington may still resort to tariffs. However, Mnuchin insisted that the White House is unified after agreeing over the weekend not to impose tariffs on China.

At the end of trade negotiations this weekend, China agreed to buy larger amounts of U.S. goods to help narrow the trade deficit between the two economies, but didn’t agree to the specific U.S. target of $200 billion.

Rising borrowing costs and an elevated dollar continue to be watched closely by investors. Last week, the 10-year Treasury note yield logged its biggest climb since April 20. The yield was hovering around 3.07% on Monday, after touching a seven-year intraday high of 3.126% on Friday. Higher yields can make stocks less attractive to investors. Meanwhile, the U.S. dollar, as gauged by the ICE U.S. Dollar Index was trading around a six-month peak.

What are strategists saying?

“Any headline that suggests a trade war with China is less likely is market positive. During earnings season, many companies have cited trade tensions as a major uncertainty for the back half of the 2018; therefore, all news suggesting otherwise will be greeted happily by shareholder,” said Jamie Cox, managing partner at Harris Financial Group.

What’s on the economic calendar?

The Chicago Federal Reserve’s national activity index came in at 0.34 in April, compared with 0.32 in March.

In a speech to the Atlanta Economics Club on Monday, Atlanta Fed President Raphael Bostic said he preferred a shift to “some form” of a flexible price-level target. Under this approach, the Fed would target a level of prices. If the price level is low for a time, the Fed would need to allow inflation to run hot to get back to the appropriate level.

Philadelphia Fed President Patrick Harker is lined up for a discussion at a Chief Executives Organization event in New York City at 2:15 p.m. Eastern, while Minneapolis Fed President Neel Kashkari is slated to appear at Michigan’s Bay College at 5:30 p.m.

What stocks are in focus?

General Electric Co. rose 2.6% after it said the multinational conglomerate’s transportation unit will merge with railroad-equipment maker Wabtec Corp. in a deal valued at $11.1 billion. Shares of Wabtec rose 4.2%.

Tesla Inc. shares added 2.9% after Chief Executive Officer Elon Musk announced a new high-performance Model 3 priced at $78,000.

Hortonworks Inc. rose 1.8% after an analyst upgraded the stock to buy, saying it was trading at a discount to peers on the basis of enterprise value to revenue.

What are other markets doing?

Asian markets moved mostly higher, and European stocks logged a nearly 4-month high, though Italian stocks dented some of those gains owing to political worries.

Gold futures edged down 40 cents, or less than 0.1%, to $1,290.90 an ounce, with the metal hitting a fresh 2018 low, while the ICE U.S. Dollar Index rose about 0.1% to 93.688.

Oil futures added 0.4% to $71.58 a barrel, buoyed by fears the U.S. could impose new sanctions on Venezuela after weekend elections in the country that were viewed as illegitimate by the opposition and foreign governments.

—Barbara Kollmeyer contributed to this article