U.S. stock futures drifted downward in the early hours, as investors sipped their coffee with one eye on their screens and the other on Washington, waiting for the morning’s inflation numbers.

In the end, inflation ticked down more than expected in April, offering a modest dose of relief to investors and policymakers alike. According to data released by the U.S. Bureau of Labor Statistics, the Consumer Price Index (CPI) rose 0.2% month-over-month, below the 0.3% forecast. On a year-over-year basis, headline inflation came in at 2.3%, just under the expected 2.4%.

Core CPI, which excludes the more volatile food and energy components and is closely watched by the Federal Reserve, also rose 0.2% on the month, missing estimates of a 0.3% gain. On an annual basis, core prices increased 2.8%, in line with expectations.

Futures rose after the report, since the softer-than-expected inflation print could bolster hopes that the Fed is making progress in its fight to tame price pressures - and may, eventually, open the door to interest rate cuts. For now, markets appear cautiously optimistic.

In the sideshow of individual stocks, there are fireworks and flops. CNS Pharmaceuticals enjoyed a 111% pop after scoring the FDA’s Orphan Drug Designation for a treatment targeting a rogues’ gallery of rare and aggressive brain diseases. Meanwhile, 3D Systems Corporation plummeted 24% after a lackluster earnings report that failed to live up to analysts’ already muted expectations.

Markets surged yesterday on news of an unexpected ceasefire in the trade skirmish between Washington and Beijing. So, who emerges victorious in this early round of geopolitical brinkmanship? Officially, the two economic titans have concluded a 90-day “peace of the brave.” Unofficially, few interpret the outcome as a win for the United States. Rather, the prevailing narrative is that Beijing has played its hand with finesse.

That perception, fair or not, was enough to delight equity markets, which treated the news as a gift from the gods. The Nasdaq leapt 4%, while the S&P 500 advanced 3.3%. Investors scrambled for high-beta stocks, especially those reliant on Chinese supply chains or global freight. Defensive sectors, as one might expect, were left behind. The mood was more restrained in Europe, where the Stoxx Europe 600 gained 1.2%, bringing its year-to-date rise to 7.3%. By contrast, the S&P 500 remains down 0.6% - a transatlantic gap that has narrowed from 12 percentage points to around eight in recent weeks.

The specifics of the truce are not trivial. For 90 days, US tariffs on the bulk of Chinese imports will fall from a punitive 145% to a more manageable 30%. China, for its part, will reduce its tariffs from 125% to 10%. Markets had been bracing for a more modest US cut to 50%, hence the exuberant bounce on Wall Street. Still, the reprieve is contingent: both sides must use this window to make tangible progress on a range of thorny issues - not an easy ask.

Yet the most intriguing market reaction came from the bond pits. Yields on US two- and ten-year Treasuries surged, with the latter reaching around 4.45%. Permit, if you will, a simplification: think of the US economy as an equation with four variables - economic momentum, tariff levels, inflation, and Federal Reserve interest rates. When Donald Trump hurled tariffs into the global arena in early April, markets initially assumed: more tariffs = more inflation = higher rates = lower growth. Then the White House began to backtrack, targeting China more narrowly while sparing others. Cue the second-order logic: fewer tariffs than expected = less inflation = weaker growth nonetheless = possible rate cuts.

Now the calculus has shifted again. The market seems to be pricing: fewer tariffs = stronger growth = more inflation (eventually) = harder for the Fed to justify cuts. Hence the bond sell-off and the adjustment in interest-rate expectations, as seen in the CME’s FedWatch tool. A rate cut in June remains off the table. More notably, July is now considered unlikely too - for the first time in weeks. September has become the new focal point.

Not that this is likely to rattle the Fed. It has recently reiterated that the cost of patience is low - a polite way of saying it sees no urgency to move. While tariffs are being eased in relative terms, the average effective US tariff remains higher than at any point since the Second World War. As Fed governor Austan Goolsbee noted, current levels are “three to five times higher than before.”

Elsewhere, Donald Trump’s crusade against high drug prices continues to weigh on pharmaceutical and biotech shares. Meanwhile, a House committee has floated a sweeping fiscal reform proposal aimed at cutting taxes by over $4 trillion and reducing federal spending by at least $1.5 trillion over the next decade. Notably, a proposed tax hike on the wealthiest Americans has been dropped.

Today's economic highlights:

On today's agenda: the unemployment claims and the 3-month ILO unemployment rate in the United Kingdom; the ZEW survey on expectations and current situation in Germany, as well as the ZEW survey on expectations for the eurozone; in the United States, last month's CPI. See the full calendar here.

  • Dollar index: 101,560
  • Gold: $3,243
  • Crude Oil (BRENT): $65.58 (WTI) $62.65
  • United States 10 years: 4.46%
  • BITCOIN: $103,560

In corporate news:

  • Amazon established a new partnership with FedEx for large package delivery following a pullback from UPS.
  • Universal Music Group appointed Matt Ellis as the new CFO, effective June 9.
  • Fox Corporation introduced an AIdriven media platform and launched a new streaming service called 'Fox One'.
  • Petrobras announced a nearly 49% increase in its firstquarter net profit and paid $2.1 billion in dividends and interest on equity.
  • China has lifted its ban on deliveries of Boeing aircraft to Chinese airlines.
  • Coinbase will replace Discover Financial in the S&P 500.
  • The Colorado Supreme Court has authorized the city of Boulder to sue Exxon and Suncor for climate change.
  • Apple will rely on an artificial intelligence tool to improve iPhone battery life in iOS 19, according to Bloomberg.
  • Elliott wins ISS support in battle for Phillips 66 board.
  • Blackstone is in talks to buy utility company TXNM, according to Reuters.

Analyst Recommendations:

  • Caterpillar Inc.: Baird upgrades to outperform from neutral with a price target raised from USD 309 to USD 395.
  • Chevron Corporation: HSBC downgrades to hold from buy with a price target reduced from USD 176 to USD 158.
  • First Solar, Inc.: Wolfe Research upgrades to outperform from peerperform with a target price of USD 221.
  • Insulet Corporation: Wolfe Research upgrades to outperform from peerperform with a target price of USD 350.
  • Johnson Controls International Plc: Deutsche Bank upgrades to buy from hold with a target price raised from USD 101 to USD 112.
  • Stanley Black & Decker, Inc.: Barclays upgrades to overweight from equalweight with a price target raised from USD 69 to USD 90.
  • Valero Energy Corporation: Goldman Sachs upgrades to buy from neutral with a price target raised from USD 127 to USD 154.
  • American Airlines Group Inc.: Bernstein maintains its outperform recommendation and raises the target price from 12 to USD 15.
  • Bill Holdings, Inc.: Canaccord Genuity maintains its buy recommendation and reduces the target price from USD 105 to USD 75.
  • Globus Medical, Inc.: Morgan Stanley maintains its overweight rating and reduces the target price from USD 100 to USD 75.
  • Nrg Energy, Inc: Guggenheim maintains its buy recommendation and raises the target price from USD 138 to USD 173.
  • Palantir Technologies Inc.: Daiwa Securities maintains a neutral recommendation with a price target raised from 90 to USD 118.
  • Reddit, Inc.: President Capital Management Corp maintains its buy recommendation and reduces the target price from 195 to USD 130.
  • Rivian Automotive, Inc.: Goldman Sachs maintains its neutral recommendation with a price target raised from 11 to USD 14.
  • Tesla, Inc.: Goldman Sachs maintains a neutral recommendation with a price target raised from 235 to USD 295.
  • The Trade Desk, Inc.: Baird maintains its outperform rating and reduces the target price from USD 145 to USD 100.
  • United Airlines Holdings, Inc.: Bernstein maintains its outperform recommendation and raises the target price from USD 84 to USD 105.
  • Vertiv Holdings Co: Daiwa Securities maintains its outperform recommendation and raises the target price from 73 to USD 102.
  • Zoominfo Technologies Inc.: Barclays maintains its equalweight recommendation and raises the target price from 9 to USD 11.