Lynas Rare Earths Ltd (ASX: LYC) saw its shares plummet by 5.56% during intraday trading, with the stock price dropping to $7.27. This significant decline comes amidst a broader market rally, with the S&P/ASX 200 Index up 0.4% to 8,267.6 points, highlighting the stark contrast in Lynas' performance.

The primary catalyst for Lynas' stock decline appears to be the recent signing of a trade deal between the United States and China. This development has led investors to reassess their positions in companies that were previously seen as potential beneficiaries of trade tensions between the two economic giants. The easing of trade hostilities has particularly impacted companies in the rare earths sector, of which Lynas is a key player.

Lynas Rare Earths had been among the best performers on the market since the beginning of April, buoyed by concerns that China might block rare earths exports. The company was viewed as one of the biggest potential winners from a prolonged trade war. However, with the signing of the trade deal, the outlook for Lynas has shifted. Investors are now recalibrating their expectations, as the company may not benefit as greatly from trade-related disruptions as once anticipated. This reassessment of Lynas' prospects in light of the improving US-China trade relations has led to the significant sell-off observed in the stock.