What happened

Shares of Macy's (NYSE:M) gained today on reports that the U.S. and China were close to finalizing a trade deal, which would remove tariffs that have raised costs for many retailers and created uncertainty with the threat of increased import taxes. 

After President Trump signaled a resolution in the trade war, retail stocks rose broadly as the SPDR S&P 500 Retail ETF (NYSEMKT:XRT) rose 1.2%, compared with just a 0.2% gain in the S&P 500. Macy's shares finished the day up 5.6%. 

The Macy's flagship department store at Herald Square

Macy's flagship store in Manhattan. Image source: Macy's.

So what

President Trump said this morning that trade talks were going well with China and that he would meet with President Xi Jinping of China to finalize the deal, though no date has been set.  

Retailers like Macy's sell a wide range of products imported from China, including apparel, electronics, and furniture. So a resolution would clearly favor the department-store chain and its peers. 

Macy's also released its 10-K annual report yesterday and added a risk factor about tariffs, making it clear that lifting the tariffs would benefit the company.

Now what 

Macy's stock may have gotten an extra boost today because the retailer is one of the cheapest on the market, trading at a P/E under 7 and offering a dividend yield of 6%. With a valuation like that, the stock is going to be more sensitive to macroeconomic news than its peers. If the two countries do finalize a deal and the tariffs are lifted, look for Macy's stock to jump again. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.