Wall Street has been riding on optimism since the weekend, as the US and China decided to hit pause on their fierce tariff dispute and signaled a joint effort to stave off a global economic slowdown.
The US will temporarily lower the extra tariffs it imposed on Chinese imports to 30% from 145% for three months, while Chinese duties on US imports will fall to 10% from 125% in the same period.
Yesterday’s close saw the S&P 500 finally elbowing back into positive territory for the year, a milestone not seen since late February.
However, the benchmark index has a lot of ground to cover and is more than 4% off the record peaks it hit earlier this year.
Both the S&P 500 and the tech-laden Nasdaq have managed to recapture levels last seen before US President Donald Trump’s April 2 “Liberation Day” tariff announcement, which had cast a pall over a broad swathe of international trade.
A 90-day pause announced on April 9 for countries other than China, along with solid earnings reports and a limited US-UK trade agreement last week, helped the benchmark indexes claw back.
Trump began a meeting with Syria’s president in Saudi Arabia today, with investors looking to see if a trade deal would materialize during the US president’s four-day trip to the Gulf region.
The S&P 500 and the Nasdaq closed higher yesterday after data showed US consumer prices rebounded moderately in April, with headline inflation rising 0.2%, compared with economists’ estimate of a 0.3% increase and versus a 0.1% drop in March.
“From a market point of view, the main relief was also that tariffs weren’t showing up in a major way in consumer prices, even though April included the 10% universal baseline tariffs, and much higher tariffs on China,” Deutsche Bank analysts said in a note.
Current bets indicate at least two 25-basis-point interest-rate cuts by the end of the year, with the first lowering potentially arriving in September, according to LSEG data.
At least three US Federal Reserve (Fed) officials including Fed governor Christopher Waller are slated to speak on the day.
The main event of the week will be Fed chair Jerome Powell’s public remarks tomorrow, which will be dissected for any hawkish or dovish undertones.
At 6.50am, Dow E-minis were down 9 points, or 0.02%, S&P 500 E-minis were down 0.75 points, or 0.01%, and Nasdaq 100 E-minis were up 15.25 points, or 0.07%.
Tesla and Nvidia led gains among major megacap and growth stocks, both rising close to 2% each in premarket trading.
On the other hand, American Eagle Outfitters dropped 13.5% after the apparel company withdrew its annual forecasts, citing tariffs-fueled economic uncertainty.
With earnings season coming to a close, results from retail giant Walmart will be on the radar later in the week.