Stock Index Futures Rally as U.S. and China Agree on Temporary Tariff Cuts, Inflation Data and Powell’s Remarks Awaited

June S&P 500 E-Mini futures (ESM25) are up +2.78%, and June Nasdaq 100 E-Mini futures (NQM25) are up +3.82% this morning after China and the U.S. agreed to reduce tariffs for 90 days following weekend trade talks in Geneva aimed at easing tensions.

The U.S. announced it would reduce its “reciprocal” tariff on Chinese goods from 125% to 10%. Still, U.S. President Donald Trump’s 20% fentanyl-related tariffs on China will remain. At the same time, China said it would lower its tariff on U.S. goods to 10% from 125%. The mutual tariff adjustments will take effect by May 14th.

“We are in agreement that neither side wants to decouple,” U.S. Treasury Secretary Scott Bessent said, adding that “we had a very robust and productive discussion on steps forward on fentanyl” and that the talks could result in “purchasing agreements” by China.

This week, investors look ahead to the release of key U.S. inflation data, remarks from Federal Reserve Chair Jerome Powell and other Fed officials, and earnings reports from several high-profile companies.

In Friday’s trading session, Wall Street’s major equity averages ended mixed. Insulet (PODD) soared over +20% and was the top percentage gainer on the S&P 500 after the company posted upbeat Q1 results and raised its full-year revenue growth guidance. Also, The Trade Desk (TTD) surged more than +18% and was the top percentage gainer on the Nasdaq 100 after the advertising-technology company reported stronger-than-expected Q1 results and gave solid Q2 revenue guidance. In addition, Microchip Technology (MCHP) climbed over +12% after the maker of chips and circuits for electronics reported better-than-expected FQ4 results and issued above-consensus FQ1 revenue guidance. On the bearish side, Akamai Technologies (AKAM) plunged more than -10% and was the top percentage loser on the S&P 500 after the cybersecurity company provided a soft full-year adjusted EPS forecast.

Fed officials, speaking Friday at the Hoover Monetary Policy Conference at Stanford University, supported Chair Jerome Powell’s “wait-and-see” stance, stating that the central bank requires greater clarity on how the tariffs will affect the economy before making any changes to interest rates.

Meanwhile, U.S. rate futures have priced in a 92.0% probability of no rate change and an 8.0% chance of a 25 basis point rate cut at the conclusion of the Fed’s June meeting.

The U.S. consumer inflation report for April will be the main highlight this week. The report is expected to confirm that inflationary pressures are still too elevated to warrant a rate cut at this time. Retail sales data for April and the University of Michigan’s preliminary consumer sentiment index for May will also be closely monitored for indications of how the prospect of tariffs is affecting consumer sentiment and spending. Other noteworthy data releases include the U.S. PPI, the Core PPI, Initial Jobless Claims, the Empire State Manufacturing Index, the Philadelphia Fed Manufacturing Index, Industrial Production, Manufacturing Production, Business Inventories, Building Permits (preliminary), Housing Starts, the Export Price Index, and the Import Price Index.

Fed Chair Jerome Powell is set to deliver remarks on the central bank’s monetary policy review at the Thomas Laubach Research Conference on Thursday. Several other Fed officials will also be making appearances throughout the week, including Kugler, Waller, Jefferson, and Daly.

First-quarter corporate earnings season is winding down, but several notable companies are due to report this week, including Walmart (WMT), Deere & Company (DE), Applied Materials (AMAT), Cisco Systems (CSCO), and Take-Two Interactive (TTWO). According to Bloomberg Intelligence, companies in the S&P 500 are expected to post an average +6.7% increase in quarterly earnings for Q1 compared to the previous year.

The U.S. economic data slate is mainly empty on Monday.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.438%, up +1.44%.

The Euro Stoxx 50 Index is up +2.10% this morning, tracking gains in U.S. stock futures after the U.S. and China agreed to temporarily suspend most tariffs on each other’s products. Mining, automobile, and technology stocks led the gains on Monday. At the same time, shares of drugmakers retreated after U.S. President Donald Trump announced plans to order a reduction in U.S. prescription drug prices. Meanwhile, the breakthrough in the U.S.-China talks provided a wave of relief to investors who had been fearing that an escalating trade war between the world’s largest economies could push the global economy into recession. Investors are also awaiting key regional economic data releases this week, including Eurozone industrial production data for March, the second estimate of first-quarter GDP, and the flash estimate of first-quarter employment data. In corporate news, ProSiebenSat.1 Media SE (PSM.D.DX) jumped over +17% after the German broadcaster received a partial offer from PPF Group N.V. Also, UniCredit Spa (UCG.M.DX) climbed more than +3% after Italy’s second-biggest bank posted better-than-expected Q1 profit.

The European economic data slate is empty on Monday.

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.82%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.38%.

China’s Shanghai Composite Index ended higher today as sentiment was boosted by signs that trade tensions between the world’s two largest economies are easing. Defense and technology stocks outperformed on Monday. The positive sentiment followed reports from both China and the U.S. of “substantial progress” during weekend talks in Geneva. Following the market close, the U.S. and China said they would temporarily reduce tariffs on each other’s goods. The combined 145% U.S. tariffs on most Chinese imports will be lowered to 30%, including those related to fentanyl, by May 14th, while the 125% Chinese tariffs on U.S. goods will be cut to 10%, according to the statement and officials at a Monday briefing. Also, Chinese Vice-Premier He Lifeng told reporters in Geneva that the two countries had agreed to set up a “trade consultation mechanism.” Linda Lam, head of equity advisory for North Asia at Union Bancaire Privee in Hong Kong, said, “This is a decisive moment, signaling willingness on both sides to conduct constructive dialogue.” On the economic front, data released over the weekend showed that China’s factory-gate prices experienced the sharpest decline in six months in April, while consumer prices fell for the third consecutive month, underscoring sluggish domestic demand despite government initiatives to stimulate consumption. In corporate news, Hisense Home Appliances climbed over +4% after entering into a strategic agreement with Midea focused on artificial intelligence, smart logistics, and advanced manufacturing.

The Chinese April CPI came in at -0.1% y/y, in line with expectations.

The Chinese April PPI stood at -2.7% y/y, in line with expectations.

Japan’s Nikkei 225 Stock Index closed higher today as signs of progress in U.S.-China trade talks boosted investors’ risk appetite. Chip stocks led the gains on Monday. However, the benchmark index’s gains were limited as some investors opted to lock in profits following the recent rally. Also, pharmaceutical stocks slumped on worries over falling drug prices after U.S. President Donald Trump announced plans to sign an executive order aimed at lowering prescription drug and pharmaceutical prices. A government survey released on Monday showed that sentiment in Japan’s service sector worsened in April due to concerns about the effects of higher U.S. tariffs. Separately, data showed that Japan’s current account surplus increased as expected in March. Meanwhile, investors are also watching for any updates in trade negotiations between Japan and the U.S. Japanese Prime Minister Shigeru Ishiba stated that the country would not agree to any initial trade deal with the U.S. that did not include an accord on autos. Ishiba also said that the government is prepared to implement additional measures to soften the economic impact of higher U.S. tariffs. Investor attention this week is centered on Japan’s preliminary GDP data, which is expected to show that the nation’s economy contracted in the first quarter for the first time in a year. In corporate news, Tokyu Fudosan climbed over +5% after the property developer projected a record full-year net profit of 85 billion yen ($582 million). At the same time, Nippon Steel slid more than -3% after the steelmaker projected a 43% year-over-year decline in its full-year net profit. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -1.63% to 24.18.

The Japanese March Current Account n.s.a. arrived at 3.678T yen, in line with expectations.

The Japanese April Economy Watchers Current Index stood at 42.6, weaker than expectations of 44.7.

Pre-Market U.S. Stock Movers

The Magnificent Seven stocks are climbing in pre-market trading after the U.S. and China agreed to temporarily suspend most tariffs on each other’s products. Tesla (TSLA) and Amazon.com (AMZN) are up about +8%. Meta Platforms (META) and Apple (AAPL) are up over +6%. Nvidia (NVDA) is up more than +5%. Alphabet (GOOGL) and Microsoft (MSFT) are up over +2%.

Chip stocks are moving higher in pre-market trading following the U.S.-China trade deal. Marvell Technology (MRVL), ON Semiconductor (ON), and Micron Technology (MU) are up more than +6%.

Pharmaceutical stocks are falling in pre-market trading after President Trump announced he would sign an executive order aimed at lowering drug prices in the U.S. Pfizer (PFE), Eli Lilly (LLY), and Merck (MRK) are down over -2%.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - May 12th

NRG (NRG), Fox Corp (FOXA), Monday.Com (MNDY), Essential Utilities (WTRG), DaVita (DVA), StandardAero (SARO), Sportradar (SRAD), Ast Spacemobile (ASTS), Southwest Gas Hold (SWX), Archer Aviation (ACHR), Brinks (BCO), Macerich (MAC), ZoomInfo (ZI), Inter and Co A (INTR), Power Integrations (POWI), Rigetti Computing (RGTI), HudBay Minerals (HBM), Surgery Partners Inc (SGRY), Xenon Pharmaceuticals (XENE), United Parks Resorts (PRKS), Nuscale Power (SMR), Acadia Healthcare (ACHC), Hertz Global Holdings (HTZ), Centuri Holdings (CTRI), New Fortress Energy (NFE), Arrowhead Pharma (ARWR), Guardian Pharmacy Services (GRDN), Rapid7 Inc (RPD), Seadrill (SDRL), Exodus Movement (EXOD), Dole (DOLE), Callaway Golf (MODG), Meridianlink (MLNK), Integral Ad Science Holding LLC (IAS), CompoSecure (CMPO), Cannae (CNNE), Highpeak Energy Acquisition (HPK), Eve Holding (EVEX), MidCap Financial Investment (MFIC), Aurinia Pharma (AUPH), Mineralys Therapeutics (MLYS).