US STOCKS-Wall St stock futures soar as US, China slash tariffs

By Shashwat Chauhan and Pranav Kashyap

May 12 (Reuters) - U.S. stock index futures jumped on Monday after the United States and China reached a deal to reduce tariffs, signaling a truce in a punishing trade war that had kept markets on edge for weeks.

The United States will cut extra tariffs it imposed on Chinese imports in April this year to 30% from 145% and Chinese duties on U.S. imports will fall to 10% from 125%, the two countries said on Monday. The new measures are effective for 90 days.

"This is a substantial de-escalation. However, the U.S. still has much higher tariffs on China," said Mark Williams, chief Asia economist at Capital Economics.

"There is no guarantee that the 90-day truce will give way to a lasting ceasefire."

At 06:50 a.m. ET, Dow E-minis YMcv1 were up 983 points, or 2.38%, S&P 500 E-minis EScv1 were up 170.5 points, or 3%, and Nasdaq 100 E-minis NQcv1 were up 791.5 points, or 3.93%.

The CBOE Volatility Index .VIX, Wall Street's "fear gauge", slipped below the 20-point threshold for the first time since late March, levels last seen before U.S. President Donald Trump announced reciprocal tariffs on most trading partners.

Most megacap and growth stocks firmed in premarket trading, with Nvidia NVDA.O jumping 4.9% and Tesla TSLA.O adding 7.6%.

Apple AAPL.O shares extended gains after a report said the company was considering raising the prices of its fall iPhone lineup. It was last up 6.7%

Chip stocks Advanced Micro Devices AMD.O and Marvell Technology MRVL.O climbed 7% and 8.4%, respectively.

Crude oil prices also surged more than 3% after the U.S.-China announcement, lifting shares of top producers Chevron CVX.N and Exxon Mobil XOM.N over 2% each.

The deal between the United States and China comes days after a U.S.-UK limited trade agreement, easing fears that Trump's reciprocal tariffs announced on April 2 would roil global trade and spark a worldwide recession.

As of Friday's market close, both the S&P 500 .SPX and the blue-chip Dow .DJI had erased nearly all losses incurred since April 2, while the tech-heavy Nasdaq .IXIC had fully recouped its earlier declines. Upbeat earnings reports and Trump's softening tariff stance had helped drive the gains.

Bucking the day's wider trend, pharmaceutical stocks dropped after Trump said he would cut prescription drug prices by 59%, closer to the level paid by other high-income countries.

Pfizer PFE.N and Johnson & Johnson JNJ.N fell 2.8% each, while Eli Lilly LLY.N lost 3.9%.

Retail giant Walmart WMT.N, network equipment maker Cisco CSCO.O and farm equipment maker Deere DE.N are among the prominent companies set to report results this week.

Retail inflation (CPI) data is due on Tuesday, while producer prices and retail sales will follow two days later.

Several Federal Reserve officials, including Chair Jerome Powell, are slated to make public remarks over the week.

Traders expect the Fed to deliver two 25-basis-point rate cuts by the end of 2025, compared with three such cuts seen at the start of May, according to data complied by LSEG.

Last week, the Fed left borrowing costs unchanged, but said the risk of both higher inflation and unemployment had risen.