The U-turn came less than 24 hours after steep new tariffs took effect on most trading partners, lifting the S&P 500 to its biggest single-day percentage gain since 2008.
The Nasdaq posted its biggest one-day jump since 2001.
Trump also announced a 90-day pause on many of his new reciprocal tariffs but raised them to 125% on Chinese imports from 104% yesterday.
Beijing had slapped 84% tariffs on US imports to match Trump’s earlier levy.
“The trade war is now turning into a direct confrontation between the US and China…,” Rabobank analysts said.
“We could again be seeing escalation and de-escalation at the same time, pulling markets in different directions,” it said.
The EU said it had agreed on a 90-day pause on counter tariffs on US goods, which were due on April 15.
Futures came off their session lows after data showed the consumer price index unexpectedly dipped 0.1% in March and advanced 2.4% in the 12 months through March.
Economists polled by Reuters had forecast the CPI to rise 0.1% for the month and climb 2.6% year-on-year.
“(The CPI data) increases the chances that the Federal Reserve (Fed) can cut rates at some point, either due to the tariffs or due to the jobs market, because inflation’s coming down,” said Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report.
Traders now see nearly 90 basis points of interest-rate cuts in 2025, according to LSEG data.
At 8.43am, Dow E-minis were down 606 points, or 1.48%, S&P 500 E-minis were down 108.75 points, or 1.98% and Nasdaq 100 E-minis were down 472.25 points, or 2.45%.
Despite yesterday’s surge, the S&P 500 and the Dow are about 4% below levels seen before the reciprocal tariffs were announced last week.
Most megacap and growth stocks slid in premarket trade after recording robust gains in the last session, with Tesla and Nvidia down more than 3% each.
Meanwhile, US bonds markets were sanguine after a sharp selloff in the last session, with the yield on the 10-year note dropping to 4.315% from its February peaks.
The CBOE Volatility Index – seen as Wall Street’s “fear gauge” – fell from its August highs and was last at 37.17 points.
Among individual shares, automakers General Motors and Ford fell about 4% each after the previous session’s gains.
Downgrades from UBS and Goldman Sachs on the stocks added to their declines.
Capri Holdings jumped 5.3% after Prada said it has struck a deal to buy smaller rival Versace from the Michael Kors-parent. The deal has an enterprise value of US$1.375 billion.
Investors will keep a close watch on comments from at least six Fed officials who are also set to make public appearances throughout the day.
US earnings season could also offer more insights into the health of corporate America.
Big banks such as JPMorgan Chase will report first-quarter results on Friday.