Is the US-China Trade Truce Enough to Carry Stocks Higher?

NEW YORK — Equity futures are sprinting higher Tuesday morning after the United States and China announced a 90-day suspension of the steepest layers of their reciprocal tariffs — a deal that, at least for now, removes the single largest overhang that has haunted this market since February.

NEW YORK, May 12, 2026 — S&P 500 futures are up 1.4% to 5,892, Nasdaq 100 futures are gaining 1.7% to 20,840, Dow Jones Industrial Average futures are adding 490 points or 1.2% to 42,180, and Russell 2000 futures are outperforming the large-cap complex at +2.1% to 2,048 — the small-cap surge a telling sign that traders are interpreting the truce as genuine relief for domestic manufacturers exposed to input-cost pressure. Gold, the dominant safe-haven trade of the past six weeks, is retreating $42 to $3,203 per ounce as the fear premium unwinds. WTI crude is up 1.2% to $63.40, reflecting a demand-optimism bid rather than any supply shift. The VIX has dropped to 19.8 — its lowest print since late March — and the 10-year Treasury yield is climbing to 4.48%, with real money rotating out of duration and back into risk assets ahead of this morning’s critical April CPI release at 8:30 AM ET.

The Trade Deal Driving the Tape

The headline out of Geneva Sunday evening — confirmed by the U.S. Trade Representative’s office and China’s Ministry of Commerce — is that both sides agreed to reduce tariffs to pre-escalation levels for 90 days while a broader framework is negotiated. The U.S. will cut its effective rate on Chinese goods from 145% to 30%, and China reduces its retaliatory rate from 125% to 10%. Neither side called it a victory. Both sides called it a necessary pause.

That language matters. A pause is not a deal. The underlying dispute over technology transfer, semiconductor supply chains, and market access remains entirely unresolved. But markets are not trading the underlying dispute this morning — they are trading the removal of an immediate cost shock, and that removal is real and quantifiable. The National Retail Federation estimated the tariff regime in place since April was adding roughly $600 per household annually in effective consumer costs; Bloomberg Economics calculates the 90-day pause saves approximately 0.4 percentage points of GDP drag over the next two quarters.

The sectors responding most aggressively in premarket trading are exactly what you’d expect: consumer discretionary names with direct China sourcing exposure, domestic manufacturers facing input-cost relief, and technology hardware companies caught in the semiconductor equipment crossfire. The equal-weight S&P is outpacing the cap-weighted index in early trading — a breadth signal that suggests this is not a megacap momentum chase but a genuine rotation into beaten-down cyclicals.

Data Visual

U.S. Equity Futures Premarket Performance — May 12, 2026

Shows the percentage move in each major index future in premarket trading, illustrating the breadth of the trade-truce rally.

Values in %

Notable Premarket Movers

The trade-truce tailwind is lifting specific names well above the index move. Apple (AAPL) is up 3.8% in premarket after analysts at Morgan Stanley reiterated their overweight rating, noting that the tariff reduction materially improves iPhone margin assumptions for the fiscal fourth quarter. Apple sources a significant portion of final assembly from China, and the tariff drag on its cost structure was one of the clearest quantifiable headwinds analysts had been modeling. The move recaptures roughly half of what the stock lost during April’s tariff escalation selloff.

Caterpillar (CAT) is gaining 2.4% as the industrials complex prices in lower steel and component input costs from Chinese suppliers. The trade desk at Barclays flagged CAT specifically in a Monday evening note as a “first-order beneficiary” of any tariff rollback, given its exposure to both Chinese raw material inputs and its direct equipment sales into Chinese infrastructure projects. Watch whether CAT can reclaim its 200-day moving average on today’s open — the stock has been trading below that level since late March.

Nvidia (NVDA) is up 2.1% despite the truce not directly addressing semiconductor export controls, which remain in force. The move here is more sentiment than substance — but it reflects a broader market thesis that a thaw in U.S.-China relations opens the door to eventual easing of chip restrictions. That is a long chain of political assumptions to price in before 9:30 AM. As we examined last week in our analysis of whether chipmakers are carrying the whole market, Nvidia’s valuation already embeds significant future-scenario optionality.

What the Calendar Is Demanding

The trade truce would dominate any normal Tuesday. This is not a normal Tuesday. April CPI lands at 8:30 AM ET and the consensus, per MarketWatch’s economic calendar, calls for a 0.3% monthly gain on the headline and 0.3% on core — which would put year-over-year headline inflation at 2.4% and core at 2.8%. Both figures are progress from March but still above the Fed’s 2% target.

The asymmetry here is acute. A soft CPI print — say, 0.2% on core — validates the trade-truce rally and extends it through the session. A hot print at 0.4% or above creates a direct conflict: traders will be asked to hold a major gap-up open while simultaneously repricing Fed rate-cut expectations lower. That scenario, in my view, is where the real test of today’s conviction happens. The Fed has been clear that it needs sequential progress on inflation before moving — a single hot print would not change policy, but it would change positioning.

Also on the calendar: the Federal Reserve’s Neel Kashkari, Minneapolis Fed President, speaks at 11:00 AM ET at a regional banking conference. Kashkari has been among the more hawkish voices on the FOMC and is unlikely to offer any comfort to rate-cut expectations, regardless of the trade news. Richmond Fed President Tom Barkin follows at 1:30 PM ET. Neither appearance will move the needle the way CPI will, but both create headline risk in a session already running hot.

PPI for April is due Thursday, and retail sales follow Friday — making this a week where the inflation and consumption picture comes into sharp relief at exactly the moment the trade truce has given bulls a reason to push higher. The tension between inflation data and equity momentum has defined the past six weeks of trading, and today it reaches another decision point.

Data Visual

VIX Closing Levels — Past Five Sessions

Tracks the VIX over the past five trading sessions to show how fear has receded into the trade-truce announcement.

What Global Markets Are Already Telling You

Overnight sessions in Asia processed the trade news in real time and delivered a decisive verdict. Japan’s Nikkei 225 closed up 2.9% to 37,840 — its largest single-day gain since January — as exporters surged on the prospect of reduced global trade friction. The Hang Seng in Hong Kong was the standout, closing up 3.4% to 22,960, with Chinese technology names leading after weeks of pressure from tariff escalation fears. The Shanghai Composite gained a more measured 1.6% to 3,388, reflecting domestic investors’ familiarity with the on-again, off-again nature of U.S.-China negotiations.

European markets opened strongly and have maintained gains into the mid-morning session. Germany’s DAX is up 2.1% to 23,540, with BASF and Volkswagen — both of which have significant Chinese revenue exposure — among the top contributors. The FTSE 100 is gaining a more modest 1.3% to 8,810, reflecting the UK index’s lower sensitivity to direct China trade flows but still benefiting from the improvement in global risk appetite. European bond yields are rising in parallel with Treasuries, confirming this is a coordinated risk-on move rather than a regional equity story.

One data point worth holding onto: the Japanese yen weakened 0.8% against the dollar overnight, reversing some of its recent safe-haven appreciation. Dollar-yen moving back toward 147 is consistent with the VIX compression we’re seeing — these cross-asset signals are aligned in a way that suggests the move is real, not just a futures market thin-session artifact. The VIX’s behavior relative to equity moves has been a persistent tell in 2026, and today’s reading at 19.8 is the clearest confirmation yet that systematic vol-sellers are comfortable adding risk exposure.

The Levels That Will Define Today’s Session

Today’s session is, in structure, a test of two competing catalysts arriving simultaneously. The trade truce provides the risk-appetite fuel. CPI provides the friction. The session’s character will be determined in the 15 minutes after 8:30 AM ET, when traders must reconcile the trade headline with the inflation reality.

My base case is that a benign CPI — anything at or below 0.3% core — lets the trade rally extend toward the S&P 500’s April 2 pre-tariff closing level near 5,930. That would represent a near-complete recovery of the tariff drawdown and would put the index within reach of the February all-time high at 6,147. A hot CPI flips the script: the gap open fades, rate-sensitive sectors roll over, and the index closes well below 5,870. The interplay between inflation data and the S&P 500’s ability to hold key technical levels has been the defining pattern of 2026, and today is no exception. Positions taken before 8:30 AM are positions taken blind. Patience into the data is not caution — it is craft.