S&P Futures experienced a notable increase on Monday following a weekend during which officials from the U.S. and China alleviated tensions, setting the stage for a potential trade agreement between President Donald Trump and President Xi Jinping this week. Futures for the Dow Jones Industrial Average increased by 261 points, representing a 0.6% rise. S&P 500 futures increased by 0.8%, while Nasdaq 100 futures rose by 1.2%, driven by strong performance from chip stocks such as Nvidia in the initial trading session. “I think we have a very successful framework for the leaders to discuss on Thursday,” stated Treasury Secretary Scott Bessent. This framework potentially encompasses a postponement of China’s rare earths restrictions, which triggered the recent trade escalation, an escalation of Trump’s proposed 100% tariffs on China set to commence on November 1, and a revival of Chinese soybean purchases. The agreement could potentially encompass a resolution regarding the TikTok dispute, with the U.S. securing a deal for the American iteration of the social video application.
“I have a lot of respect for President Xi, and we are going to come away with the deal,” Trump stated on Monday. Chipmakers, the industry most vulnerable to escalating tensions with China, spearheaded the rally in early trading on Monday. Nvidia, Broadcom, and AMD each experienced an increase of approximately 2%. Tesla and Apple experienced an increase of approximately 1% each. “Details are still limited, and nothing will be finalized until the Trump-Xi meeting, but a renewed truce now seems near-certain, with China likely fully delaying their rare earth export controls for a year—better than the alternative of an agreement to grant licenses,” stated Tobin Marcus. “This overall better-than-expected outcome is likely to be favorable for markets this week, contingent upon a successful Trump-Xi meeting.”
Equities are emerging from a week characterized by bullish momentum, as all three primary indices reached unprecedented peaks last Friday. The Dow Jones Industrial Average achieved a historic milestone by closing above the 47,000 threshold for the first time. The S&P 500 reached 6,800 for the first time on Friday. All three major benchmarks recorded their second consecutive week of gains. Market participants anticipate a reduction in interest rates by the Federal Reserve on Wednesday, especially following the Bureau of Labor Statistics’ release of inflation data that came in slightly below expectations last week. Upcoming earnings reports from major technology firms are also on the agenda. A number of prominent stocks, including Alphabet, Amazon, Apple, Meta Platforms, and Microsoft, are set to announce their third-quarter results this week.
Despite the positive sentiment stemming from the improving relations between China and the U.S., a setback involving Canada tempered investor enthusiasm. On Saturday, Trump imposed an additional 10% tariff on imports from Canada due to the country’s failure to promptly remove a television advertisement featuring former President Ronald Reagan criticizing tariffs.