Markets Eye CPI as Trade Tensions Cool — What’s Next for the Rally?
U.S. stock futures were slightly lower on Tuesday morning after a red-hot Monday session where the major averages surged on fresh optimism over easing trade tensions between the United States and China.
The rally was sparked by news that Washington and Beijing agreed to substantially reduce their punitive tariffs for a 90-day period, reviving hopes that the two economic giants are edging toward a more stable trade relationship. President Trump’s administration slashed its elevated tariffs on Chinese goods from a peak of 145% down to 30%. In response, China agreed to cut its retaliatory tariffs from 125% down to 10%. The temporary tariff freeze gave investors a reason to breathe after weeks of market jitters around inflationary pressure and disrupted global supply chains.
Tariff Truce Boosts Sector Confidence
Monday’s gains were broad-based, led by strength in retail, luxury goods, and industrials — sectors that had been battered by the uncertainty around tariffs. But even with the cutbacks, tariffs remain significantly higher than they were at the beginning of Trump’s presidency, keeping the door open for future volatility.
Inflation in Focus: CPI Print Ahead
- Headline CPI YoY: +2.4% (unchanged from March)
- Headline CPI MoM: +0.3% (vs -0.1% in March)
- Core CPI YoY: +2.8%
- Core CPI MoM: +0.3%
These figures could heavily influence the Fed’s next moves on interest rates. Chair Jerome Powell stated last week that policy is “well-calibrated,” yet the Fed is remaining cautious as inflation risks and labor market weaknesses persist. The federal funds rate remains steady between 4.25% and 4.50%.
U.S. Slashes “De Minimis” Tariffs — Hits Temu & Shein
Also grabbing headlines, the Biden administration has officially ended the “de minimis” exemption on low-value packages — a move initially pushed by Trump. Starting May 14, items under $800 shipped from China will now be hit with a 54% tariff and a $100 flat fee, down from the previous rate of 120% and $200. The rule had allowed millions of packages — mostly from discount e-commerce platforms like Shein and Temu — to enter the U.S. tariff-free. This crackdown is also aimed at combating the inflow of counterfeit goods and even fentanyl.
China Lifts Ban on Boeing Deliveries
In a further sign of de-escalation, Bloomberg reported that China has quietly lifted a ban on Boeing aircraft deliveries, which had been in place for over a month. Boeing was previously forced to fly aircraft back to the U.S. as local Chinese carriers rejected deliveries. Now, airlines and government agencies have been told they can resume receiving planes — a welcome relief for the U.S. jetmaker, whose shares are slightly higher in premarket trading.
Crude Oil Holding Gains
Oil markets remained firm on Tuesday after Monday’s breakout. At 3:30 AM ET:
- Brent Crude: $65.04 (+0.1%)
- WTI Crude: $62.08 (+0.2%)
Both benchmarks had risen over 1.5% Monday, climbing to their highest closes since April 28. While the tariff truce helped boost sentiment, the core drivers of the trade conflict — like the U.S.-China trade imbalance — remain unresolved.
Technical Watch: QQQ Bulls Take Control
Markets kicked off the week with a bullish tone, particularly the $QQQ tech index, which closed firmly above the key 500 level and reclaimed the 200-day moving average (~490). This puts bulls in a commanding position with the next resistance level near 514 as the upside continuation target.
But with CPI data dropping today, the market could go either way. A soft print could provide rocket fuel to melt shorts and extend the squeeze. A hotter-than-expected number? It might spark the pullback many have been waiting for.
Today’s Key Economic Data:
- 8:30 AM ET — April CPI & Core CPI
- 4:30 PM ET — API Weekly Crude Oil Stockpiles
OP Shoutout:
Big shoutout to the OP team on Friday for the NFLX hedge idea — that drop of over $20 paid huge! I’ll be rolling those profits directly into March $INTC calls cost-free. The INTC setup remains one of our highest-conviction plays. Catch you in chat!
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Stay sharp, stack your gains, and trade what the charts confirm — not what the headlines fear.
— Team OptionsPlayers
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