December S&P 500 E-Mini futures (ESZ25) are up +1.38%, and December Nasdaq 100 E-Mini futures (NQZ25) are up +1.84% this morning, signaling a rebound from Friday’s sell-off on Wall Street as sentiment improved after U.S. President Donald Trump softened his stance on tariff threats against Beijing.
President Trump said in a Truth Social post on Sunday that he wants to help China, not hurt it, signaling openness to negotiations and a possible easing of tensions. “Don’t worry about China, it will all be fine!” Trump said. He added that Chinese President Xi Jinping “had a bad moment,” referring to China’s decision last week to impose export controls on rare earth materials.
On Friday, Mr. Trump announced an additional 100% tariff on China and export controls on “any and all critical software” starting November 1st, just hours after threatening to cancel his upcoming meeting with President Xi Jinping. That followed China’s move to impose new port fees on U.S. ships, launch an antitrust probe into Qualcomm, and introduce broad new restrictions on exports of rare earths and other critical materials. China’s Ministry of Commerce said on Sunday that the U.S. should refrain from threatening it with higher tariffs and called for further talks to address unresolved trade issues, warning that it will not hesitate to retaliate if Washington continues its actions against Beijing.
This week, investors will focus on developments surrounding the U.S. government shutdown, remarks from Federal Reserve Chair Jerome Powell and other Fed officials, as well as the start of the third-quarter earnings season.
In Friday’s trading session, Wall Street’s major equity averages closed sharply lower. The Magnificent Seven stocks slumped, with Tesla (TSLA) sliding over -5% and Amazon.com (AMZN) falling more than -4% to lead losers in the Dow. Also, chip stocks sank, with Arm Holdings (ARM) plunging over -9% and ON Semiconductor (ON) dropping more than -8%. In addition, Venture Global (VG) plummeted over -24% after the natural gas exporter unexpectedly lost an arbitration dispute with its customer, BP. On the bullish side, Applied Digital (APLD) surged more than +16% after the company reported better-than-expected FQ1 results and signed a new lease agreement with CoreWeave.
Economic data released on Friday showed that the University of Michigan’s preliminary U.S. consumer sentiment index fell to a 5-month low of 55.0 in October, but still came in above expectations of 54.1. Also, the University of Michigan’s U.S. October year-ahead inflation expectations unexpectedly fell to 4.6%, compared to expectations of no change at 4.7%, while 5-year implied inflation expectations remained unchanged at 3.7%, in line with expectations.
Fed Governor Christopher Waller said on Friday that “the labor market is weak,” adding that he would back quarter-point rate cuts at each of the Fed’s two remaining meetings this year. Also, St. Louis Fed President Alberto Musalem said, “Looking ahead, I am open-minded about a potential further reduction in interest rates to provide further insurance against labor market weakening.”
Meanwhile, U.S. rate futures have priced in a 97.8% chance of a 25 basis point rate cut and a 2.2% chance of no rate change at the Fed’s monetary policy committee meeting later this month.
Investor attention remains on developments surrounding the U.S. government shutdown, which has entered its third week. An administration official said last week that the U.S. Bureau of Labor Statistics would bring some furloughed employees back to release the September inflation report. The BLS announced on Friday that it would publish the CPI report on October 24th, instead of the originally scheduled date of October 15th. The shutdown delayed the release of the key U.S. jobs report for September, and the timing of its publication, along with other official economic data, remains unclear. Therefore, Fed-compiled industrial and manufacturing production figures could serve as the key U.S. data highlights of the week, alongside the New York and Philadelphia Fed surveys.
Market participants will also pay close attention to Fed Chair Jerome Powell’s speech on the economic outlook and monetary policy at the National Association for Business Economics Annual Meeting on Tuesday. A host of other Fed officials will also be making appearances throughout the week, including Waller, Barr, Miran, Paulson, Collins, Musalem, Bowman, Bostic, Schmid, Barkin, and Kashkari.
In addition, the Fed will release its Beige Book survey of regional business contacts this week, which provides an update on economic conditions in each of the 12 Fed districts. The Beige Book is published two weeks before each meeting of the policy-setting Federal Open Market Committee.
Third-quarter corporate earnings season kicks off this week, with big banks such as JPMorgan Chase (JPM), Wells Fargo (WFC), Goldman Sachs (GS), and Citigroup (C) set to release their earnings reports on Tuesday, followed by Bank of America (BAC) and Morgan Stanley (MS) on Wednesday. Johnson & Johnson (JNJ), Abbott Labs (ABT), BlackRock (BLK), Charles Schwab (SCHW), Progressive (PGR), and American Express (AXP) are among other major names scheduled to deliver quarterly updates during the week. Although PepsiCo (PEP) and Delta Air Lines (DAL) started the third-quarter reporting period last week, results from big banks have traditionally marked the unofficial start of the earnings season. According to Bloomberg Intelligence, companies in the S&P 500 are expected to post an average +7.2% increase in quarterly earnings for Q3 compared to the previous year, marking the smallest rise in two years.
The bond market is closed today for the Columbus Day holiday.
The Euro Stoxx 50 Index is up +0.61% this morning, recovering part of Friday’s steep losses. Technology and mining stocks led the gains on Monday. Sentiment improved after U.S. President Donald Trump struck a conciliatory tone toward China just two days after threatening an additional 100% tariff on its imports. Meanwhile, French President Emmanuel Macron announced a new cabinet on Sunday as pressure mounts on him and his reappointed Prime Minister, Sebastien Lecornu, to quell France’s escalating political crisis and push through a budget. Investors are awaiting appearances in Washington this week by European Central Bank President Christine Lagarde and Bank of England Governor Andrew Bailey as policymakers convene for the International Monetary Fund and World Bank fall meetings. Final inflation data for September from Germany on Tuesday, Spain on Wednesday, and the Eurozone on Friday will also draw close attention. In corporate news, PSI Software AG (PSAN.D.DX) jumped over +35% after the German software company agreed to be acquired by private equity firm Warburg Pincus in a deal valued at more than 700 million euros.
The European economic data slate is mainly empty on Monday.
China’s Shanghai Composite Index (SHCOMP) closed down -0.19%, while Japan’s financial markets were closed for a national holiday.
China’s Shanghai Composite Index closed lower today as fresh tariff threats from U.S. President Donald Trump reignited concerns over a U.S.-China trade war. Still, the benchmark index recovered much of its earlier losses by the close as some investors appeared to view the selloff as a buying opportunity, expecting the worst to be avoided after Trump indicated over the weekend that he was open to negotiations. Rare earth stocks rallied on Monday as China leveraged the minerals as a key tool in trade negotiations. Semiconductor stocks also gained ground as investors wagered that Beijing will intensify efforts to limit U.S. tech imports and further support domestic companies. Morgan Stanley strategists and economists said, “We see short-term tensions leading into another limited agreement.” They said the most probable outcome is that the U.S. and China will strike another “narrow deal,” maintaining tariff pauses as the current U.S.-China tariff truce is set to expire in early November. Meanwhile, customs data released on Monday showed that China’s exports grew at the fastest pace in six months in September, signaling resilience that strengthens Beijing’s position in the latest trade war with the U.S. China’s trade is likely to remain resilient for the remainder of the year, with external demand continuing to serve as a key growth driver despite U.S. tariffs, according to Lynn Song at ING. In corporate news, China Vanke fell over -2% after Xin Jie, the recently appointed chairman of the state-backed property developer, resigned from his position. Investor attention now shifts to China’s consumer and producer inflation data due Wednesday, which are expected to show that deflation persists in Asia’s largest economy, highlighting the continued fragility of domestic demand despite recent policy support. Investors are also awaiting the Fourth Plenum, set for October 20th-23rd, which will lay out China’s economic, political, and social priorities as well as its development plans for the next five years.
The Chinese September Trade Balance stood at $90.45 billion, weaker than expectations of $98.50 billion.
The Chinese September Exports rose +8.3% y/y, stronger than expectations of +6.0% y/y.
The Chinese September Imports rose +7.4% y/y, stronger than expectations of +1.5% y/y.
Japan’s Nikkei 225 Stock Index was closed today for the Sports Day holiday. The markets will reopen on Tuesday.
Pre-Market U.S. Stock Movers
The Magnificent Seven stocks advanced in pre-market trading following President Trump’s conciliatory remarks about China, with Nvidia (NVDA) rising over +3% and Amazon.com (AMZN) gaining more than +2%.
Chip stocks are moving higher in pre-market trading, with Marvell Technology (MRVL) and ON Semiconductor (ON) rising more than +4%.
Applied Materials (AMAT) climbed more than +4% in pre-market trading after BofA upgraded the stock to Buy from Neutral with a price target of $250.
Cryptocurrency-exposed stocks are rising in pre-market trading after the price of Bitcoin rebounded from the weekend’s selloff. Strategy (MSTR) is up more than +1%. Also, MARA Holdings (MARA) is up over +3%, and Coinbase (COIN) is up more than +2%.
Palo Alto Networks (PANW) gained over +3% in pre-market trading after BTIG upgraded the stock to Buy from Neutral with a $248 price target.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - October 13th
Fastenal (FAST).
