Stock futures declined early Tuesday, following a significant rally the previous day, as investors awaited a closely watched inflation report. Dow Jones Industrial Average futures dipped by 108 points, or about 0.25%, while futures tied to the S&P 500 and Nasdaq 100 dropped 0.4% and 0.46%, respectively.
Markets are now focused on the release of the Consumer Price Index (CPI), a key measure of inflation in the U.S. economy. According to consensus estimates, the April CPI is expected to show an annual increase of 2.4%, consistent with the previous month. Core inflation, which excludes the more volatile categories of food and energy, is also anticipated to remain steady at 2.8%. Analysts are particularly interested in whether the slower inflation trend seen in March has continued or if recent reports of rising input costs for businesses have led to higher consumer prices.
The cautious start to Tuesday’s trading comes on the heels of a massive market surge Monday, sparked by renewed optimism over U.S.-China trade relations. After high-level negotiations in Switzerland, the two nations agreed to reduce many of their tariffs to 10% for a 90-day period. While the U.S. will maintain a 20% duty on Chinese imports linked to fentanyl, overall tariffs on Chinese goods will now stand at 30%. This partial rollback raised hopes that tensions between the world’s two largest economies may be easing, reducing the threat of a trade war-induced recession.
In response, the Dow Jones Industrial Average surged over 1,100 points, while the S&P 500 climbed more than 3%, nearly erasing its year-to-date losses. The Nasdaq Composite jumped by 4.4%, marking the strongest performance for all three major indexes since early April.
The momentum from the trade development also impacted economic outlooks. A leading investment bank revised its forecast for a U.S. recession, lowering the 12-month probability from 45% to 35%. The firm cited the reduced risk of severe economic disruption due to high tariffs, a more optimistic view of future trade policies, and the lessened impact on GDP growth.
Officials from both countries are expected to resume trade discussions in the coming weeks to work toward a broader agreement. Further announcements related to preliminary trade deals are anticipated, which could slightly reduce the effective U.S. tariff rate even more.
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