July 23 (Reuters) - U.S. stock index futures rose on Wednesday after President Donald Trump clinched a trade deal with Japan, fueling hopes for a wave of new agreements ahead of the fast-approaching August 1 deadline.
The pact will slash tariffs on Japanese autos from 27.5% to 15%, with duties on other goods dropping from 25% to 15%.
At 7:03 a.m. ET, S&P 500 E-minis were up 23.5 points, or 0.37%, Nasdaq 100 E-minis were up 34.5 points, or 0.15%, and Dow E-minis were up 202 points, or 0.45%.
Futures tracking the domestically focused Russell 2000 small-cap index <RTYcv1> (.RUT), rose 1%.
Trump said that EU representatives are headed to the negotiating table on Wednesday, igniting hopes for a breakthrough deal with Europe. While the EU emphasized its commitment to a negotiated solution, it is also preparing countermeasures in case of a deadlock.
"Diminishing trade policy uncertainty is supporting risk assets. Nevertheless, several countries (notably the EU) face steeper tariff rates starting August 1 and higher levies pose a downside risk to U.S. growth and upside risk to inflation," Elias Haddad, senior markets strategist at Brown Brothers Harriman.
Meanwhile, the S&P 500 notched its eighth record close in a month on Tuesday, buoyed by easing trade tensions, a resilient U.S. economy, and upbeat second-quarter earnings.
The Dow climbed 0.4%, now within striking distance of its all-time high, while the Nasdaq slipped as declines in Meta and Microsoft weighed on the tech-heavy index.
Investors are now laser-focused on earnings from the "Magnificent Seven" — the market's star performers who have powered stocks to record highs.
Tesla (TSLA.O), and Alphabet (GOOGL.O), are set to report after the bell on Wednesday. With AI optimism running high and valuations stretched, expectations for these tech giants are sky-high, leaving little margin for disappointment. In premarket trading, both the stocks held steady.
In earnings-focused moves, Texas Instruments (TXN.O), tumbled 11% after its quarterly profit forecast failed to impress investors, as it pointed to weaker-than-expected demand for its analog chips from some customers and underscored tariff-related uncertainty.
The earnings also weighed on its peer analog chipmakers, with Analog Devices (ADI.O), NXP Semiconductors (NXPI.O), and ON Semiconductor (ON.O), falling between 4 and 7%.
Automaker General Motors (GM.N), also became a casualty of the trade war on Tuesday when it said Trump's tariffs took a $1.1 billion hit on its quarterly earnings, sending its shares down more than 8%.
Toymaker Hasbro (HAS.O), rose 3.2% after raising its annual revenue forecast, while AT&T (T.N), slipped 1.6% despite beating quarterly profit estimates.
In economic data, existing home sales numbers for June is due on the day. Thursday's weekly jobless claims numbers and S&P Global's flash PMI data will be closely assessed to gauge economic health in the wake of tariff uncertainties.
Following a mixed set of economic data last week, traders have ruled out an interest rate cut by the Federal Reserve next week. Odds for a September reduction stand at 56%, according to the CME FedWatch tool.
Reporting by Nikhil Sharma and Pranav Kashyap in Bengaluru; Editing by Maju Samuel
