US stock index futures jumped today after the US and China reached a deal to reduce tariffs, signaling a truce in a punishing trade war that had kept markets on edge for weeks.
The US will cut extra tariffs it imposed on Chinese imports in April this year to 30% from 145%, and Chinese duties on US imports will fall to 10% from 125%, the two countries said today.
The new measures are effective for 90 days.
“This is a substantial de-escalation. However, the US still has much higher tariffs on China,” said Mark Williams, chief Asia economist at Capital Economics.
“There is no guarantee that the 90-day truce will give way to a lasting ceasefire,” Williams said.
At 6.50am, Dow E-minis were up 983 points, or 2.38%, S&P 500 E-minis were up 170.5 points, or 3%, and Nasdaq 100 E-minis were up 791.5 points, or 3.93%.
The CBOE Volatility Index, Wall Street’s “fear gauge”, slipped below the 20-point threshold for the first time since late March, levels last seen before US President Donald Trump announced reciprocal tariffs on most trading partners.
Most megacap and growth stocks firmed in premarket trading, with Nvidia jumping 4.9% and Tesla adding 7.6%.
Apple shares extended gains after a report said the company was considering raising the prices of its fall iPhone lineup. It was last up 6.7%
Chip stocks Advanced Micro Devices and Marvell Technology climbed 7% and 8.4%, respectively.
Crude oil prices also surged more than 3% after the US-China announcement, lifting shares of top producers Chevron and Exxon Mobil over 2% each.
The deal between the US and China comes days after a US-UK limited trade agreement, easing fears that Trump’s reciprocal tariffs announced on April 2 would roil global trade and spark a worldwide recession.
As of Friday’s market close, both the S&P 500 and the blue-chip Dow had erased nearly all losses incurred since April 2, while the tech-heavy Nasdaq had fully recouped its earlier declines.
Upbeat earnings reports and Trump’s softening tariff stance had helped drive the gains.
Bucking the day’s wider trend, pharmaceutical stocks dropped after Trump said he would cut prescription drug prices by 59%, closer to the level paid by other high-income countries.
Pfizer and Johnson & Johnson fell 2.8% each, while Eli Lilly lost 3.9%.
Retail giant Walmart, network equipment maker Cisco and farm equipment maker Deere are among the prominent companies set to report results this week.
Retail inflation (CPI) data is due tomorrow, while producer prices and retail sales will follow two days later.
Several Federal Reserve (Fed) officials, including chair Jerome Powell, are slated to make public remarks over the week.
Traders expect the Fed to deliver two 25-basis-point rate cuts by the end of 2025, compared with three such cuts seen at the start of May, according to data complied by LSEG.
Last week, the Fed left borrowing costs unchanged, but said the risk of both higher inflation and unemployment had risen.