The major U.S. index futures are currently pointing to a sharply higher open on Monday, with stocks poised to more than offset the modest losses posted last week.
The upward momentum on Wall Street comes following news of a U.S.-China trade deal that drastically reduces the massive tariffs on each other’s goods.
The White House said the agreement calls for the U.S. and China to each lower tariffs by 115 percent while retaining an additional 10 percent tariff.
The U.S. will retain tariffs imposed in response to the fentanyl national emergency, resulting in an effective tariff rate on Chinese goods of 30 percent.
In previous tit-for-tat moves, tariffs on U.S. and Chinese goods had spiked as high as 125 percent and 145 percent, respectively, which Treasury Secretary Scott Bessent had described as the “equivalent of an embargo.”
The White House said the 34 percent reciprocal tariffs on U.S. and Chinese goods will be suspended for 90 days beginning Wednesday, May 14th.
Both nations also agreed to establish a mechanism to continue important discussions about trade and economics, the White House said.
“While the trade spat has only been dialed back for 90 days, it’s a major breakthrough as far as investors are concerned,” said Russ Mould, investment director at AJ Bell. “The fact the two countries were talking was already a major win given they’ve been at each other’s throats during the first and second Trump presidential terms.”
“Some people thought the best-case outcome from the weekend’s discussions would be an agreement to simply keep talks going,” he added. “Therefore, to have reached an initial deal so quickly and one that rolls back tariffs by a large amount is a pleasant surprise.”
After failing to sustain an initial move to the upside, stocks showed a lack of direction over the course of the trading session on Friday. The major averages spent much of the day bouncing back and forth across the unchanged line before eventually closing narrowly mixed.
While the Nasdaq crept up 0.78 points or less than a tenth of a percent to 17,928.92, the S&P 500 edged down 4.03 points or 0.1 percent to 5,659.91 and the Dow dipped 119.07 points or 0.3 percent to 41,249.38.
For the week, the S&P 500 declined by 0.5 percent, the Nasdaq fell by 0.3 percent and the Dow slipped by 0.2 percent.
The early strength on Wall Street came amid optimism about a potential U.S.-China trade deal ahead of Treasury Secretary Scott Bessent’s talks with Chinese officials in Switzerland this weekend.
A Bloomberg report citing people familiar said the U.S. is hoping to slash its China tariffs to below 60 percent from the current level of at least 145 percent during the weekend talks.
However, President Donald Trump said in a post on Truth Social that a higher “80% Tariff on China seems right,” partly offsetting the positive sentiment.
While Trump also said many trade deals are “in the hopper,” traders remain cautious even after yesterday’s announcement of the framework of a U.S.-U.K. trade deal.
Among individual stocks, shares of Lyft (NASDAQ:LYFT) skyrocketed after the ride-sharing company reported a first quarter profit compared to a year-ago loss and boosted its share buyback plan to $750 million.
Shares of The Trade Desk (NASDAQ:TTD) also spiked after the digital marketing company reported better than expected first quarter results.
On the other hand, shares of Affirm Holdings (NASDAQ:AFRM) plunged after the buy now, pay later company reported an unexpected fiscal third quarter profit but provided disappointing revenue guidance for the current quarter.
Travel booking platform Expedia (NASDAQ:EXPE) also moved sharply lower after reporting first quarter revenue that missed estimates and issuing soft guidance.
Reflecting the lackluster performance by the broader markets, most of the major sectors ended the day showing only modest moves on the day.
Gold stocks showed a strong move to the upside, however, with the NYSE Arca Gold Bugs Index surging by 3.3 percent. The strength among gold stocks came amid a sharp increase by the price of the precious metal.
Networking, telecom and energy stocks also saw some strength on the day, while biotechnology and pharmaceutical stocks moved to the downside.