U.S. stock futures edged higher Wednesday, fueled by optimism surrounding a new trade deal between the United States and Japan. The White House hailed the agreement, which sets a lower tariff rate on Japanese imports than initially planned by President Donald Trump, as “massive.” Meanwhile, the corporate earnings season continues, spotlighting tech heavyweights Alphabet (NASDAQ:GOOGL) and Tesla (NASDAQ:TSLA), who are scheduled to report after market close. Shares of Texas Instruments (NASDAQ:TXN) slipped as their quarterly profit guidance failed to meet investor expectations.
Futures on the rise
By 03:38 ET, Dow futures climbed 137 points (0.3%), S&P 500 futures gained 17 points (0.3%), and Nasdaq 100 futures rose 26 points (0.1%). The previous day’s trading closed with mixed results as investors digested a batch of fresh earnings reports.
General Motors (NYSE:GM) shares dropped sharply after the automaker revealed a more than one-third decline in second-quarter profits, largely impacted by a $1 billion cost linked to Trump’s tariffs.
However, confidence in heavy investments in artificial intelligence helped support some major tech stocks. The true test of investor enthusiasm will come later in the session when Alphabet and Tesla announce their quarterly results.
Market watchers remain focused on the evolving trade landscape, especially with the August 1 deadline approaching for Trump’s elevated “reciprocal” tariffs.
Details of the U.S.-Japan trade deal
President Trump described the new arrangement with Japan as a “massive deal,” noting that the Asian country will now face a 15% tariff rate.
He also highlighted that Japan will invest $550 billion in the U.S., with the U.S. “receiving 90% of the Profits.”
“Japan will open their Country to Trade including Cars and Trucks, Rice and certain other Agricultural Products, and other things. Japan will pay Reciprocal Tariffs to the United States of 15%,” Trump stated on social media.
This deal is among the most substantial of several preliminary trade agreements following Trump’s introduction of increased tariffs in April. It came after reports that Japan’s chief trade negotiator, Ryosei Akazawa, met with Trump at the White House on Tuesday.
While the 15% tariff is less than the 25% originally proposed, it contradicts Japan’s prior demand for a complete exemption from U.S. tariffs.
Analysts at Capital Economics commented, “The trade deal with the U.S. announced today removes a key downside risk to Japan’s economy. We estimate that the net effect of today’s announcement will be a reduction in the average tariff rate faced by Japanese exporters in the U.S. of around one percentage point.”
Alphabet and Tesla’s earnings under the spotlight
Against the backdrop of trade uncertainties, investors are gearing up for crucial earnings reports from Alphabet and Tesla. These two companies will be the first among the “Magnificent 7” tech giants to release results for the second quarter.
Analysts will particularly watch for updates from Alphabet on its AI initiatives, following recent commitments to invest heavily in the emerging technology. Investors are keen to see that these investments help shield Google’s core search and advertising business from new AI competitors.
“For Google, sentiment is very mixed, with bears worried about the secular outlook for search as AI chatbots capture share and regulatory [slash] legal pressures while bulls emphasize compelling secular tailwinds in many key markets and a relatively cheap valuation,” Vital Knowledge analysts wrote.
Tesla faces scrutiny amid mounting competition that has dented sales in its primary auto business. Deliveries have declined year-over-year, and further challenges loom after Trump signed a fiscal bill on July 4 that eliminated solar and electric vehicle tax credits.
Still, investors hope Tesla can generate new revenue streams through its robotics and autonomous driving ventures. According to Vital Knowledge, enthusiasm around these areas has kept Tesla’s stock price “beyond where it should trade based exclusively on auto fundamentals alone.” The company’s share price is down more than 12% so far this year.
Texas Instruments’ shares slip despite strong earnings
Texas Instruments posted stronger-than-expected Q2 results, driven by improved demand in its industrial segment. However, shares fell in after-hours trading as investors grew cautious about the outlook for its analog chip business.
Revenue rose 16% year-on-year to $4.45 billion, hitting the high end of guidance and beating analysts’ forecasts of $4.35 billion.
Earnings per share came in at $1.41, including a 2-cent benefit not accounted for in prior guidance.
Sequentially, revenue increased 9%, propelled by a “continued broad recovery” in industrial sales. Net income for the quarter reached $1.30 billion.
Looking ahead, Texas Instruments expects Q3 revenue between $4.45 billion and $4.80 billion, with EPS ranging from $1.36 to $1.60. Analysts had predicted $4.59 billion in revenue and $1.49 in EPS, per LSEG data cited by Reuters.
While not yet directly impacted by Trump’s tariffs, rising costs for chip manufacturing equipment have prompted some clients to curb spending. CEO Haviv Ilan noted during a post-earnings call that recovery in the automotive sector has been “shallow,” with tariffs and geopolitical tensions “disrupting and reshaping” supply chains globally.
Gold slips
Gold prices dipped slightly, retreating from strong gains earlier this week after the U.S.-Japan trade deal boosted risk appetite and diminished some of gold’s safe-haven appeal.
However, gold remains under $100 shy of its April record high as uncertainty over Trump’s tariff policy lingers.
Ahead of a highly anticipated Federal Reserve meeting, cautious trading supported gold prices even as the dollar pulled back from recent strength.
Spot gold fell 0.2% to $3,426.80 an ounce, while gold futures declined 0.1% to $3,440.70 by 03:38 ET.
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