December S&P 500 E-Mini futures (ESZ25) are up +0.91%, and December Nasdaq 100 E-Mini futures (NQZ25) are up +1.28% this morning, pointing to a sharply higher open on Wall Street as signs that the U.S. and China were nearing a trade deal boosted risk appetite at the start of a busy week.
Top trade negotiators from the U.S. and China said on Sunday that they reached an initial consensus on multiple contentious issues, including tariffs, shipping fees, fentanyl, and export controls. China’s official Communist Party mouthpiece urged the world’s biggest economies to “jointly safeguard hard-won achievements” from recent trade negotiations, ahead of Thursday’s high-stakes meeting between U.S. President Donald Trump and Chinese leader Xi Jinping. “I think we have a very successful framework for the leaders to discuss on Thursday,” said U.S. Treasury Secretary Scott Bessent.
This week, market participants will also focus on earnings reports from major tech names and the Federal Reserve’s interest rate decision.
In Friday’s trading session, Wall Street’s major equity averages closed at record highs. Most members of the Magnificent Seven stocks advanced, with Alphabet (GOOGL) and Nvidia (NVDA) gaining over +2%. Also, chip stocks rallied, with Advanced Micro Devices (AMD) climbing more than +7% to lead gainers in the Nasdaq 100 and Micron Technology (MU) rising over +5%. In addition, Ford Motor (F) surged more than +12% and was the top percentage gainer on the S&P 500 after the automaker reported better-than-expected Q3 results. On the bearish side, Deckers Outdoor (DECK) plunged over -15% and was the top percentage loser on the S&P 500 after the maker of Hoka sneakers and Ugg boots issued disappointing full-year revenue guidance.
The U.S. Bureau of Labor Statistics report released on Friday showed that consumer prices rose +0.3% m/m in September, weaker than expectations of +0.4% m/m. On an annual basis, headline inflation picked up to +3.0% in September from +2.9% in August, weaker than expectations of +3.1%. Also, the core CPI, which excludes volatile food and fuel prices, rose +0.2% m/m and +3.0% y/y in September, weaker than expectations of +0.3% m/m and +3.1% y/y. In addition, the U.S. S&P Global manufacturing PMI rose to 52.2 in October, stronger than expectations of 51.9, and the S&P Global services PMI rose to 55.2, stronger than expectations of 53.5. At the same time, the University of Michigan’s U.S. October consumer sentiment index was revised lower to 53.6, weaker than expectations of 54.6.
“Much like a Sherlock Holmes’ story, inflation is the dog that didn’t bark. So many people have been expecting a sharp increase in inflation and have positioned bearishly as a result, but the market is likely to keep squeezing the shorts until they realize that the economy–and Corporate America–is more resilient than many expected,” said Chris Zaccarelli at Northlight Asset Management.
Third-quarter corporate earnings season hits full throttle, and investors await fresh reports from high-profile companies this week, including Microsoft (MSFT), Alphabet (GOOGL), Meta Platforms (META), Apple (AAPL), Amazon.com (AMZN), Eli Lilly (LLY), AbbVie (ABBV), Mastercard (MA), Visa (V), ServiceNow (NOW), Caterpillar (CAT), UnitedHealth (UNH), Boeing (BA), Exxon Mobil (XOM), and Chevron (CVX). 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.
Market watchers will also keep a close eye on the Fed’s interest rate decision and Chair Jerome Powell’s post-policy meeting press conference. The central bank is widely expected to cut the Fed funds rate by 25 basis points to a range of 3.75% to 4.00%, particularly after last Friday’s mostly favorable September inflation data. Investors will pay close attention to the Fed’s accompanying comments for clues on how far and how fast interest rates may fall from here. U.S. money markets have almost fully priced in a follow-up rate cut in December.
In other trade news, President Trump announced a series of agreements during his Asia diplomacy tour aimed at securing access to critical minerals and expanding a market for U.S. agricultural products. He offered exemptions from his reciprocal tariffs on key exports from Thailand, Cambodia, Vietnam, and Malaysia as part of the deals.
In tariff news, Mr. Trump announced on Saturday an additional 10% tariff on Canada in response to an advertisement from Ontario that he said misrepresented remarks by former President Ronald Reagan. “Because of their serious misrepresentation of the facts, and hostile act, I am increasing the Tariff on Canada by 10% over and above what they are paying now,” Trump posted on his Truth Social platform. U.S. tariffs on Canada currently stand at 35%, with energy products at 10%, though goods that meet the terms of the U.S.-Mexico-Canada Agreement are exempt from the duties.
Meanwhile, the U.S. government shutdown has entered its 27th day, with no clear resolution in sight. If the government shutdown continues, the publication of official U.S. economic data scheduled for this week, including the advance estimate of third-quarter gross domestic product, weekly jobless claims, and the September PCE inflation report, will be delayed. This leaves investors focusing on the Conference Board’s Consumer Confidence Index, the S&P/CS HPI Composite - 20 n.s.a., and the National Association of Realtors’ pending home sales data. Allianz Research estimates that the shutdown has likely already shaved 0.45 percentage points off fourth-quarter annualized GDP growth.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.025%, up +0.70%.
The Euro Stoxx 50 Index is up +0.32% this morning as signs of easing trade tensions between the U.S. and China boosted sentiment. Mining and technology stocks led the gains on Monday. U.S. President Donald Trump said the U.S. and China are poised to “come away with” a trade deal, as he is set to meet with Chinese President Xi Jinping later this week in South Korea, where the two leaders will decide on the framework of an agreement reached over the weekend. A survey released on Monday showed that German business morale improved slightly in October, as companies anticipate the economy will gain momentum next year. Separately, data showed that bank lending to Eurozone businesses dipped slightly in September but remained close to two-year highs, while household credit grew at its fastest pace since early 2023. Meanwhile, market participants are preparing for a string of monetary policy decisions from major central banks this week, including those from the European Central Bank and the Federal Reserve. The ECB is widely expected to keep the deposit rate unchanged at 2.00%. Comments from President Christine Lagarde will be scrutinized for any indications of a potential further rate cut in the coming months. Just hours before the ECB’s rate decision, preliminary Eurozone GDP data will shed light on the impact caused so far by Trump’s tariffs. In corporate news, Porsche (P911.D.DX) rose over +2% after reaffirming its full-year guidance and reporting Q3 earnings in line with last month’s profit warning.
Germany’s Ifo Business Climate Index was released today.
The German October Ifo Business Climate Index came in at 88.4, stronger than expectations of 88.1.
Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +1.18%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +2.46%.
China’s Shanghai Composite Index closed higher and hit a new 10-year high today amid signs that the U.S. and China were nearing a trade agreement. Technology stocks, which analysts say would benefit the most from the U.S.-China trade deal, outperformed on Monday. Trade negotiators from China and the U.S. announced on Sunday that they had reached a series of agreements covering tariffs, shipping fees, fentanyl, and export controls over two days of talks in Malaysia, paving the way for Trump and Xi to finalize the deal. Trump and Xi are set to meet on Thursday on the sidelines of the Asia-Pacific Economic Cooperation summit in Gyeongju, South Korea. Kenny Ng, a securities strategist at Everbright Securities International, said, “Investors have been sitting on the sidelines watching trade talks for a while, and the weekend developments were a pretty positive surprise.” Sentiment was further boosted by data showing that China’s industrial profits grew at their fastest pace in nearly two years in September. Industrial profits jumped 21.6% from a year earlier in September, following a 20.4% increase in August, according to the National Bureau of Statistics. The latest increase was fueled by last year’s low base and government initiatives to curb excess capacity. Investor attention this week is also on China’s official PMIs for October. “China’s economic activity is expected to remain weak but stable in October,” said ANZ Research strategist Zhaopeng Xing. In addition, investors will keep an eye on the Financial Street Forum in Beijing this week, where several top financial regulators, including PBOC Governor Pan Gongsheng, are scheduled to deliver speeches. In corporate news, WuXi AppTec climbed over +4% in Hong Kong after the pharmaceutical company posted strong Q3 results and raised its full-year guidance.
Japan’s Nikkei 225 Stock Index closed sharply higher today, topping the psychologically important 50,000 mark for the first time as signs of easing U.S.-China trade tensions boosted sentiment. The benchmark index was also supported by a weaker yen and rising expectations that Japan’s new Prime Minister, Sanae Takaichi, will implement measures to stimulate the economy. In addition, there was optimism surrounding U.S. President Donald Trump’s visit to Japan this week, during which he is scheduled to meet with Sanae Takaichi. Chip and heavy-industry stocks led the gains on Monday. Meanwhile, data from the Bank of Japan released on Monday showed that a leading indicator of Japan’s service-sector inflation picked up for the second consecutive month in September, reinforcing the central bank’s view that rising labor costs will help keep inflation anchored around its 2% target. Investors are also awaiting the BOJ’s monetary policy decision later this week, where the central bank is expected to keep its benchmark rate unchanged at 0.5%. Attention will center on how the nine-member policy board divides its votes. The central bank will also release its quarterly economic outlook alongside its policy statement. Japan’s unemployment rate and industrial production data, along with Tokyo CPI figures, due on Friday, will further clarify the country’s economic picture. In addition, market participants will pay attention to results from companies such as Advantest Corp. as the earnings season picks up steam. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +12.74% to 28.68.
The Japanese September Corporate Services Price Index rose +3.0% y/y, stronger than expectations of +2.8% y/y.
Pre-Market U.S. Stock Movers
The Magnificent Seven stocks are moving higher in pre-market trading amid risk-on sentiment, with Nvidia (NVDA) rising over +2% and Amazon.com (AMZN) gaining more than +1%.
Microsoft (MSFT) rose more than +1% in pre-market trading after Guggenheim upgraded the stock to Buy from Neutral with a $586 price target.
Chip stocks advanced in pre-market trading, with Micron Technology (MU) and Marvell Technology (MRVL) climbing over +3%.
Avidity Biosciences (RNA) jumped over +43% in pre-market trading after Novartis agreed to acquire the company in a deal valued at about $12 billion.
Rare earth stocks slumped in pre-market trading amid signs of easing trade tensions between the U.S. and China. Ramaco Resources (METC) is down over -5% and MP Materials (MP) is down more than -4%.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - October 27th
Welltower (WELL), Cadence Design (CDNS), Waste Management (WM), NXP Semiconductors NV (NXPI), Keurig Dr Pepper (KDP), Hartford (HIG), Celestica Inc. (CLS), Arch Capital (ACGL), Nucor (NUE), Brown&Brown (BRO), Cincinnati Financial (CINF), FTAI Aviation (FTAI), Principal Financial (PFG), F5 Networks (FFIV), Universal Health Services (UHS), Alexandria RE (ARE), Revvity (RVTY), Rambus (RMBS), Crane (CR), Biomarin Pharma (BMRN), Amkor (AMKR), Confluent (CFLT), Simpson Manufacturing (SSD), Avis (CAR), Nov (NOV), Ameris (ABCB), Noble (NE), Kilroy (KRC), Dorman (DORM), Whirlpool (WHR), Agilysys (AGYS), Alliance Resource (ARLP), Olin (OLN), Seacoast Banking Florida (SBCF), Bank of Hawaii (BOH), NBT Bancorp (NBTB), Northwest Bancshares (NWBI), H2O America (HTO), Daqo New Energy ADR (DQ), Netstreit (NTST), Lakeland Financial (LKFN), Custom Truck One Source (CTOS), Leggett&Platt (LEG), Carter’s (CRI), Piedmont Office (PDM), Two Harbors (TWO).
