Wall Street opens higher as soft May inflation boosts rate cut hopes; trade truce cheers markets

Wall Street opens higher as soft May inflation boosts rate cut hopes; trade truce cheers markets

US stocks edged higher on Wednesday after May inflation data came in softer than expected, bolstering hopes of future rate cuts by the Federal Reserve. Sentiment also improved after the US and China outlined the contours of a new trade agreement following two days of high-level talks in London.

The Dow Jones Industrial Average rose 27 points, or 0.1%, while the S&P 500 gained 0.2%. The tech-heavy Nasdaq Composite outperformed, climbing 0.4%.

Consumer prices rose just 0.1% in May, below the 0.2% consensus estimate, while core CPI—which excludes food and energy—also rose 0.1%. The data sent Treasury yields lower, as markets began to reprice the odds of a Fed pivot later this year.

“Inflation in May was lower than anticipated, suggesting the tariffs aren’t having a large immediate impact because companies have been using existing inventories or slowly adjusting prices due to uncertain demand,” said Alexandra Wilson-Elizondo, global co-CIO of multi-asset solutions at Goldman Sachs Asset Management. She added that with the 90-day tariff pause still in effect, markets will remain caught between inflation and employment data. “If inflation stays under control or the job market weakens, the Federal Reserve will likely consider cutting interest rates down the road.”

Meanwhile, investors welcomed signs of progress on the trade front. President Donald Trump said on Truth Social that a new trade framework with China was “done, subject to final approval with President Xi and me.” Under the proposed deal, China will supply rare earth minerals and assembled magnets “up front,” while the US will maintain 55% tariffs but allow Chinese students to study at American universities. “A great WIN for both countries!!!” Trump wrote.

The outline marks the most significant breakthrough in trade talks this year. Both countries had earlier agreed to temporarily reduce tariffs in May, but a permanent resolution has remained elusive. The latest framework suggests a willingness on both sides to avoid escalation, though final details remain pending.

With inflation cooling and geopolitical tensions easing, risk appetite found support in early trade. However, investors remain watchful of bond market signals and upcoming economic releases that could influence the Fed’s trajectory.

Meanwhile, European markets held modest gains mid-morning, reflecting the global tone of cautious optimism. Germany’s DAX was up 0.33%, France’s CAC 40 rose 0.34%, and the UK’s FTSE 100 inched 0.15% higher at 10:18 a.m. local time.