US stocks gained early Monday as the US and China homed in on a trade deal during a crucial week on Wall Street marked by Big Tech earnings and a Federal Reserve interest-rate decision.
The S&P 500 Index climbed 0.9% as of 9:31 a.m. in New York, with the US benchmark extending its march to fresh highs. The technology heavy-Nasdaq 100 Index soared 1.4%, with five of the so-called Magnificent Seven stocks on deck to report financial results in the coming days.
US and Chinese trade negotiators have lined up a docket of key agreements on issues including tariffs, shipping fees, fentanyl and export controls ahead of a meeting between President Donald Trump and Xi Jinping later this week. Trump told reporters on Monday, “I really feel good,” about a deal with China.
The days ahead will present a big test for the artificial intelligence narrative that has propelled the stock market to record highs despite a government shutdown and uncertainty around the US economy.
Microsoft Corp., Alphabet Inc., Meta Platforms Inc., Amazon.com Inc. and Apple Inc. are on the earnings tap, with investors set to focus on the giants’ artificial-intelligence investment plans as the competition to scale capabilities ramps up. The Magnificent Seven is projected to deliver profit growth of 14% in the third quarter, down from 27% in the second quarter, according to data compiled by Bloomberg Intelligence. But the group has a history of reporting earnings that far exceed Wall Street estimates.
The S&P 500 is on track to have the most companies delivering sales beats in about four years this earnings season, with Corporate America seeming to cope just fine with the impact of tariffs. Almost 70% of index members to have reported so far have exceeded third-quarter sales estimates, according to a Bloomberg Intelligence earnings tracker.
Active stock pickers have heeded to Wall Street’s warnings about an AI bubble, paring their exposure to technology high-fliers even as the group has an unprecedented grip on the broader market. Mutual fund managers have been scaling back holdings of tech giants in the past three months, reducing their exposure to the segment to 30%, almost 5 percentage points below the group’s weight in the S&P 500.
Meantime, the trading desk at JPMorgan Chase & Co. said it’s removing its prudence from the past two weeks over positioning, technicals, and valuation, saying expectations for trade deals and strong earnings from tech behemoths make “the setup much cleaner.” Head of global-market intelligence Andrew Tyler said his teams’ cautious tone “ultimately proved to be the wrong call.”
Wall Street pros have all but cemented buts that the Fed will cut interest rates by a quarter of a percentage point when it concludes its meeting on Oct. 29. However, an economic-data blackout due to the government shutdown makes the outlook murky around 2026.
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