U.S. stock index futures retreated Tuesday, cooling after stellar gains on the announcement of a U.S.-China trade deal, ahead of the release of key inflation data, News.az reports citing Xinhua.
At 05:40 ET (09:40 GMT), Dow Jones Futures fell 62 points, or 0.2%, S&P 500 Futures dropped 18 points, or 0.3%, and Nasdaq 100 Futures slipped 85 points, or 0.4%.
The main averages on Wall Street soared on Monday, posting their best day since April 9, fueled by optimism that a relative trade truce between the world’s two largest economies will avert a severe economic downturn.
Economists at Goldman Sachs cut their estimated risk of a recession in the U.S. to 35% from 45% after Washington agreed to substantially cut its elevated tariffs on Beijing to 30%, after they were raised to at least 145% by President Donald Trump. China, meanwhile, said it would slash its levies to 10% from a retaliatory level of 125%. Both countries also said they would suspend the tariffs for 90 days.
The U.S. will also bring down tariffs on lower-value products imported from China, further cooling a trade spat with Beijing.
CPI release in spotlight
But despite optimism over the trade deal, markets were now seen turning cautious ahead of key consumer price index inflation data, which is due on Tuesday morning.
The print is expected to show headline and core CPI remained elevated in April, especially as Trump’s tariffs pushed up input costs for businesses.
Core inflation, which strips out volatile items like food and fuel, is tipped to be at 0.3% on a monthly basis and 2.8% annually.
While Monday’s trade deal does mark a deescalation, tariffs on China are still well above levels seen prior to April 2 - a trend that could underpin U.S. inflation.
The inflation data is widely expected to factor into the Federal Reserve’s plans for interest rates, after the central bank recently signaled that it saw no near-term changes in rates.
Still, the Fed is widely expected to cut interest rates eventually this year. The CME Fedwatch tool shows investors pricing in a 36.3% chance for an end-July rate cut, and a 52.1% chance for a September cut.
China airlines return to Boeing - Bloomberg
In the corporate sector, Boeing (NYSE:BA) is likely to be in the spotlight after Bloomberg reported that China has removed a month-long ban preventing local airlines from taking delivery of its planes, in another possible easing of the trade tensions between Washington and Beijing.
Government officials have begun instructing local carriers and government agencies this week that deliveries from the U.S. planemaker can resume, the Bloomberg report said, citing people familiar with the matter.
Coinbase Global (NASDAQ:COIN) surged in premarket trading, with the crypto exchange set to join the S&P 500 index, replacing Discover Financial Services (NYSE:DFS) before the start of trading on May 19.
Crude steadies near two-week high
Oil prices steadied Tuesday near a two-week high, as traders digested recent announcements around the China-U.S. trade deal.
At 05:40 ET, Brent futures gained 0.4% to $65.20 a barrel, and U.S. West Texas Intermediate crude futures rose 0.5% to $62.26 a barrel.
Both contracts rose by about 1.5% on Monday, adding to the previous week’s gains and notching their highest settlements since April 28.
Despite the ratcheting down in tensions between Washington and Beijing, plenty of uncertainty still exists as the underlying factors that led to the dispute remain, including the U.S. trade deficit with China.
