Wall Street futures quiet as attention shifts to US-China trade talks

Investor caution lingered in the air on Tuesday as U.S. stock index futures displayed a lackluster performance, with all eyes on the ongoing second day of trade discussions between the United States and China. The primary goal of these talks is to ease the tensions stemming from a tariff dispute that has had a negative impact on global markets throughout the year.

Anticipation among investors remains high, hoping for a potential improvement in relations between the two economic powerhouses. This optimism follows the positive sentiment generated by a preliminary agreement reached in Geneva last month. However, doubts resurfaced when Washington voiced its concern over Beijing’s alleged interference with the export of crucial goods, particularly in sectors like autos, aerospace, semiconductors, and defense.

In an effort to facilitate progress, White House economic adviser Kevin Hassett hinted at a possible agreement to relax export controls on specific semiconductor products in exchange for China expediting the shipment of rare earth minerals. This development was met with positivity, as Richard Hunter, head of markets at interactive investor, expressed in a statement that the temporary halt in tariff escalations could serve as a stepping stone towards achieving a mutual relaxation in trade tensions.

As of 05:44 a.m. ET, Dow E-minis experienced a minor decline of 35 points or 0.08%, while S&P 500 E-minis showed a modest increase of 2.75 points or 0.05%. Nasdaq 100 E-minis were also on a positive trajectory, advancing by 12.25 points or 0.06%. The month of May witnessed a notable surge in U.S. equities, with the S&P 500 and Nasdaq recording their most substantial monthly gains since November 2023. Contributing factors to this growth included encouraging earnings reports and a softening of President Donald Trump’s stringent trade policies.

While the S&P 500 remains slightly below its peak levels from February, and the Nasdaq trails behind its record highs set in December, investors are eagerly anticipating the upcoming U.S. consumer prices data release scheduled for Wednesday. This information is crucial in providing insights into the Federal Reserve’s future rate decisions. Despite prevailing expectations of unchanged interest rates in the coming week, market participants remain vigilant for any signs of inflation, amplified by the potential price pressures resulting from Trump’s tariffs.

Market indicators suggest the likelihood of two 25-basis point rate cuts by the end of the year, with a first cut estimated at a 63% probability by September, according to the CME FedWatch tool. In a separate development, shares of vaccine manufacturers experienced a decline in premarket trading following an announcement from Health Secretary Robert F. Kennedy Jr. regarding the replacement of all 17 members of a U.S. Centers for Disease Control and Prevention vaccine expert panel.

Moderna’s shares saw a decrease of 0.5%, and Pfizer’s shares dipped by 0.1% in response to this news. As investors continue to monitor the outcome of the U.S.-China trade talks and await key economic data releases, the market remains poised for potential fluctuations driven by these critical developments.