Investing.com-- U.S. stock futures edged higher Wednesday, bouncing after recent gains, but sentiment remains weak overall after reciprocal tariffs announced by President Donald Trump took effect, including an additional duty on China goods, intensifying a global trade war and heightening fears of a global recession.
At 05:15 ET (09:15 GMT), Dow Jones Futures gained 25 points, or 0.1%, climbed 20 points, or 0.4%, and Nasdaq 100 Futures slipped 140 points, or 0.8%.
The main indices saw wild swings in volatile trading Tuesday, with the eventually closing 1.6% lower at 4,982.77, marking its first close below the 5,000 threshold in nearly a year. The broad-based index is nearly 19% off its record high, close to a bear market.
Over the course of four days, the Dow has lost more than 4,500 points, over 10%, while the S&P 500 has sustained a 12% loss. The Nasdaq Composite is down more than 13% in that period.
Trump escalates tariff war with China
President Donald Trump’s sweeping reciprocal tariffs have officially taken effect, including a new 50% hike on Chinese imports, marking a dramatic escalation in global trade tensions.
This resulted in a 104% cumulative tariff on Chinese imports, and follows Beijing’s retaliatory 34% tariffs, effectively reignited a trade war between the world’s two largest economies.
China’s foreign ministry reiterated Wednesday that Beijing will take “resolute and forceful” measures to protect its own interests.
“If the U.S. genuinely wants to resolve the problem through dialogue and negotiation, it should show an attitude of equality, respect and mutual benefit,” Foreign Ministry Spokesperson Lin Jian said at a regular press briefing.
Other notable tariffs included a 20% duty on the European Union, 24% on Japan, 46% on Vietnam, 25% on South Korea, and 32% on Taiwan.
The tariffs are part of a broader U.S. trade strategy that imposes steep levies on countries deemed to have unfair trade advantages.
The policy shift has rattled global markets, sparked retaliatory tariffs from key U.S. trade partners, and raised fears of a broader economic downturn.
Global recession risks not priced in - Goldman
Yet despite these hefty recent losses, Goldman Sachs analysts said the global recession risks were still not fully priced in by markets, signaling further declines ahead.
"Among common recession gauges, only the VIX is at levels associated with past recession peaks: longer-dated equity volatility, credit spreads and the yield curve are not," Goldman Sachs analysts said in a note.
"We think there is a high chance that we continue to push toward full recession pricing, which would imply weaker equities, wider credit spreads, a deeper Fed cutting cycle and higher longer-dated equity volatility," they added.
Analysts said that the most direct path to recovery would be a significant reversal in trade policy, as current pricing and macro signals do not yet offer a floor against downside risks.
Fed minutes due
Aside from the tariff rollout, investors will keep an eye on the Federal Reserve’s meeting minutes, due later in the session.
San Francisco Federal Reserve Bank President Mary Daly on Tuesday became the latest U.S. central banker to say there’s no rush to cut interest rates despite the uncertainty surrounding the size and scope of Trump’s tariffs.
However, speculation is growing that the Federal Reserve will start cutting its policy rate as soon as next month, to compensate for slowing growth as the tariffs bite.
There is now a 56% chance of a Fed interest-rate cut in May, up from about 40% earlier in the day, based on the prices of short-term U.S. interest-rate futures traded at CME Group (NASDAQ:CME).
Delta to issue earnings
In the corporate sector, investors will study the latest earnings from Delta Air Lines (NYSE:DAL), with expectations on the low side after the carrier issued a profit warning last month, citing the U.S. economic uncertainty.
“Consumers in a discretionary business do not like uncertainty,” CEO Ed Bastian said in March, noting then that corporate spending in particular is starting to stall.
Constellation Brands (NYSE:STZ), the owner of beers like Modelo and Pacifico, will release its results after the U.S. close.
Crude falls to four-year lows
Oil prices slumped Wednesday, dropping to their lowest levels in more than four years as the trade war between China and the U.S., the world’s two biggest economies, intensified.
At 05:15 ET, Brent futures dropped 2.6% to $61.20 a barrel, and U.S. West Texas Intermediate crude futures fell 2.7% to $57.98 a barrel.
These losses follow the escalating tariff war between the U.S. and China, after President Trump increased the duties on Chinese goods to a hefty 104%.
Oil has lost about one-fifth of its value since Trump announced higher tariffs on its trading partners on April 2, the biggest five-day drop since March 2022.
(Ayushman Ojha contributed to this article.)
