U.S. Stocks Rally on Fed Rate Cut Hopes and Progress in China Trade Talks
U.S. stocks extended their rally on Monday, building on last week’s record highs as investors grew more confident that the Federal Reserve will cut interest rates and that U.S.-China trade negotiations are moving toward a breakthrough.
At 10:32 a.m. ET (14:32 GMT), the Dow Jones Industrial Average rose 245 points (0.5%), the S&P 500 gained 60 points (0.9%), and the NASDAQ Composite jumped 340 points (1.5%), with all three indexes adding to Friday’s record closes.
Fed Rate Cut Expectations Strengthen
Investor sentiment was lifted by softer U.S. inflation data from last week, which bolstered expectations that the Fed will cut rates at its upcoming two-day policy meeting ending on October 29.
Markets now widely anticipate a 25-basis-point cut, with some analysts forecasting further easing in the coming months.
“We continue to look for a 25bp rate cut this week, another in December, and possibly 50bp more in early 2026,” said analysts at ING in a recent note.
The prospect of lower borrowing costs has fueled a broad rally in equities, especially in growth and tech stocks, as investors bet on renewed economic momentum heading into 2026.
U.S.-China Trade Progress Boosts Optimism
Adding to the upbeat tone, U.S. and Chinese officials reached a “framework understanding” on key trade issues over the weekend during the ASEAN Summit in Kuala Lumpur.
Treasury Secretary Scott Bessent confirmed both sides agreed to defer new tariff threats and pause China’s rare-earth export restrictions, setting the stage for President Donald Trump and President Xi Jinping to meet later this week to finalize a potential agreement.
“I think we’re going to have a deal with China,” Trump told reporters on Sunday.
Chinese negotiator Li Chenggang added that both sides had reached a “preliminary consensus” after candid and in-depth discussions.
The developments lifted global market sentiment, easing months of trade tension and supporting risk assets across regions.
Big Tech Earnings in Focus
Investors are also watching corporate earnings closely this week, with several “Magnificent Seven” tech giants set to report results.
- Microsoft (NASDAQ: MSFT), Meta Platforms (NASDAQ: META), and Alphabet (NASDAQ: GOOGL) report on Wednesday.
- Apple (NASDAQ: AAPL) and Amazon (NASDAQ: AMZN) follow on Thursday.
Traders are paying close attention to updates on AI investment, cloud computing demand, and consumer spending trends as potential catalysts for further market gains.
Elsewhere, Keurig Dr Pepper (NASDAQ: KDP) surged after raising its annual sales forecast and securing $7 billion in financing to purchase Dutch coffee giant JDE Peet’s.
Qualcomm (NASDAQ: QCOM) also jumped higher after announcing two new AI chips designed for data center inference workloads, directly challenging Nvidia (NASDAQ: NVDA) in the competitive AI chip space.
Oil Steady, Gold Retreats
Oil prices were steady after last week’s strong rally. Brent crude edged down 0.8% to $65.19, while U.S. West Texas Intermediate (WTI) gained 0.2% to $61.62 per barrel.
Crude had surged previously after the U.S. imposed new sanctions on major Russian oil companies, fueling supply concerns.
Meanwhile, gold prices fell as easing U.S.-China tensions reduced demand for safe-haven assets. Spot gold slipped 2.8% to $3,996.96 per ounce, and U.S. gold futures dropped 3.1% to $4,009.55.
The decline follows last week’s profit-taking, after gold hit record highs above $4,300 per ounce amid geopolitical concerns and monetary policy expectations.
