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Futures advance: Dow 2.44%, S&P 500 2.98%, Nasdaq 3.89%

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US, China reach deal to cut tariffs

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Drugmakers fall as Trump to cut drug prices

(Updates before markets open)

By Shashwat Chauhan and Pranav Kashyap

May 12 (Reuters) - Wall Street's main indexes were set

to open sharply higher on Monday as 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 U.S. 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.

"The market has to re-calibrate to what things look like

before 'Liberation Day' and that looks like a very constructive

growing economy," said Thomas Hayes, chairman at Great Hill

Capital LLC.

The CBOE Volatility Index, Wall Street's "fear

gauge", briefly 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 against most

trading partners on April 2, which he dubbed Liberation Day.

At 08:06 a.m. ET, Dow E-minis were up 1,007 points,

or 2.44%, S&P 500 E-minis were up 169.25 points, or

2.98%, and Nasdaq 100 E-minis were up 783 points, or

3.89%.

Most megacaps and growth stocks firmed in premarket trading,

with Nvidia ( NVDA ) jumping 4.4% and Tesla adding 8%.

Apple ( AAPL ) shares built on their gains after a report

said the company was considering raising the prices of its fall

iPhone lineup. It was last up 6.2%

Chip stocks Advanced Micro Devices ( AMD ) and Marvell

Technology ( MRVL ) climbed 6.4% and 8.1%, respectively.

Crude oil prices also surged close to 4% after the

U.S.-China announcement, lifting shares of top producers Chevron ( CVX )

and Exxon Mobil ( XOM ) 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 and the

blue-chip Dow had erased nearly all losses incurred since

April 2, while the tech-heavy Nasdaq had fully recouped

its earlier declines. Upbeat earnings reports and Trump's

softening tariff stance had helped drive the gains.

"You (will) have a bunch of forced buyers that are going to

be in the market playing catch up," said Great Hill Capital's

Hayes.

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 ) and Johnson & Johnson ( JNJ ) fell over 2%

each, while Eli Lilly ( LLY ) lost 3.4%.

Retail giant Walmart ( WMT ), network equipment maker Cisco ( CSCO )

and farm equipment maker Deere 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 cuts seen at the

start of May, according to data compiled by LSEG.