U.S. stock futures were flat on Wednesday, following a solid start to the week. A softer-than-expected inflation report and the U.S.-China trade truce boosted market sentiment, with investors now closely watching developments in further trade negotiations.

U.S.-China Trade Truce Lifts Market Sentiment

Stocks on Wall Street have been climbing after Washington and Beijing reached an agreement over the weekend to scale back strict reciprocal tariffs. This move is seen as a joint effort to prevent a global economic slowdown.

• The U.S. will reduce the additional tariffs on Chinese goods to 30% from 145% for a period of three months.

• China will lower tariffs on U.S. goods to 10% from 125% for the same duration.

This trade thaw lifted U.S. stock indices, with the S&P 500 turning positive for the year on Tuesday, although it remains over 4% off its record highs from earlier this year.

Market Rebounds Amid Trade Deals and Earnings

Both the S&P 500 and Nasdaq have rebounded to levels last seen before April 2, when President Trump announced his “Liberation Day” tariffs. The market momentum has been supported by a 90-day tariff pause for countries other than China, strong corporate earnings, and a limited U.S.-UK trade deal reached last week.

The S&P 500 and Nasdaq posted gains on Tuesday after U.S. inflation data showed that consumer prices rose 0.2% in April, lower than economists’ expectations of a 0.3% increase. Core inflation, excluding food and energy, also showed modest growth, signaling limited inflationary pressure despite tariff hikes.

Analysts See Relief as Tariffs Don’t Majorly Impact Prices

According to analysts at Deutsche Bank, markets are finding relief in the fact that tariffs haven’t significantly impacted consumer prices, despite the 10% baseline tariffs and much higher tariffs on Chinese goods in April.

Market Focus Turns to Federal Reserve and Trade Talks

As of 04:45 a.m. ET, Dow E-minis were up by 43 points (0.1%), S&P 500 E-minis rose 2.5 points (0.04%), and Nasdaq 100 E-minis gained 3.25 points (0.02%).

Looking ahead, traders are expecting two 25-basis point interest rate cuts by the end of 2025, with the first likely to occur in September. Investors will closely monitor Federal Reserve officials speaking today, including Fed Governor Christopher Waller, and Chair Jerome Powell, who will deliver public remarks on Thursday.

Key Stocks and Retail Earnings

Tesla and Nvidia led gains among major megacap stocks, with both companies rising by close to 2% each in premarket trading.

On the downside, American Eagle Outfitters saw a 13.8% drop after the apparel company withdrew its annual guidance due to economic uncertainty tied to tariffs.

With more than 90% of S&P 500 companies having reported earnings, Walmart’s earnings report later this week will be a key focus for investors.