At a Glance
- Major US stock indices, futures, and international markets show upward trends, signaling positive investor sentiment.
- Easing US-China trade tensions and optimism surrounding Q3 earnings are boosting market performance.
- Stronger-than-expected Chinese economic data supports global growth prospects.
- The ongoing US government shutdown continues to create uncertainty and delay economic reports, though a rare CPI report is expected.
- The Federal Reserve is widely expected to cut interest rates at its upcoming meeting.
Market Rally Driven by Trade Optimism and Earnings Hopes
Stock index futures are climbing today, building on last Friday’s gains, with the Nasdaq 100 reaching a one-week high. Investor sentiment has improved following President Trump’s reassuring statement on Sunday regarding US-China trade relations, where he expressed confidence that I think we’re going to be fine with China. This de-escalation of trade tensions is a significant factor contributing to the market’s upward momentum. Additionally, optimism that third-quarter earnings results will continue to exceed expectations is providing further support for equities.
💡 The S&P 500 Index (SPX) is up +0.71%, the Dow Jones Industrials Index (DOWI) is up +0.51%, and the Nasdaq 100 Index (IUXX) is up +0.89%. December E-mini S&P futures (ESZ25) are trading up +0.75%, and December E-mini Nasdaq futures (NQZ25) are up +0.91%.
US-China Relations and Economic Data
Further details on the diplomatic front emerged as Treasury Secretary Bessent confirmed that the US and China will hold preparatory talks this week in Malaysia. These discussions are aimed at paving the way for President Trump’s meeting with Chinese President Xi Jinping later this month, which will take place on the sidelines of the Asia-Pacific Economic Cooperation conference in South Korea.
📊 Positive economic indicators from China are also bolstering global growth prospects. China’s Q3 GDP growth came in at +1.1% quarter-over-quarter and +4.8% year-over-year, surpassing expectations of +0.8% and +4.7% respectively. Furthermore, China’s September industrial production rose by +6.5% year-over-year, exceeding the forecast of +5.0%. In a sign of a strengthening labor market, China’s September jobless rate unexpectedly decreased by 0.1 to 5.2%, defying expectations of no change at 5.3%.
Government Shutdown and Economic Uncertainty
Meanwhile, the United States government shutdown continues into its fourth week, casting a shadow over market sentiment and causing delays in the release of crucial economic reports. The shutdown means that several key government reports, including the weekly initial unemployment claims from the past three weeks and the September payroll report, will be postponed. The Bureau of Labor Statistics (BLS) announced that the September consumer price report, initially scheduled for last Wednesday, will now be released this Friday.
⚡ The White House has warned that a prolonged government shutdown could lead to widespread dismissals of employees in government programs not aligned with President Trump’s priorities. Bloomberg Economics estimates that this could result in 640,000 federal workers being furloughed, potentially expanding jobless claims and pushing the unemployment rate up to 4.7%.
📌 The combination of US-China trade tensions, the ongoing government shutdown, and concerns about credit quality in the US has fueled a safe-haven rally in precious metals. Gold and silver both reached fresh all-time highs last Friday as investors sought refuge in these assets.
Q3 Earnings Season in Focus
The markets’ attention this week is firmly fixed on corporate earnings reports as the third-quarter earnings season progresses. Expectations for rising corporate profits are providing a bullish backdrop for stocks. According to Bloomberg Intelligence, a significant 85% of S&P 500 companies that have reported earnings so far have surpassed analyst forecasts. Moreover, over 22% of S&P 500 companies that have issued guidance for their Q3 earnings results are anticipated to beat analyst expectations, marking the highest figure in a year.
📊 Despite these positive beats, overall Q3 profits are projected to have increased by +7.2% year-over-year, representing the smallest increase in two years. Q3 sales growth is also expected to slow to +5.9% year-over-year, down from +6.4% in the second quarter.
📍 The markets are currently pricing in a near-certainty, a 99% probability, of a 25 basis point rate cut at the Federal Open Market Committee (FOMC) meeting scheduled for October 28-29.
Global Markets Show Strength
International stock markets are also experiencing gains today. The Euro Stoxx 50 index has risen to a two-week high, showing an increase of +0.96%. China’s Shanghai Composite closed up by +0.63%. In Japan, the Nikkei Stock 225 rallied to a new record high, closing sharply higher by +3.37%.
Interest Rate Outlook
December 10-year T-notes (ZNZ5) are up +3 ticks today, with the 10-year T-note yield falling by 1.7 basis points to 3.992%. T-notes recovered from earlier losses and turned higher primarily due to a decrease in inflation expectations, as the 10-year breakeven inflation rate dropped to a 4.25-month low of 2.267%. The ongoing US government shutdown is also providing support for T-notes, as it could lead to increased job losses, reduced consumer spending, and a weaker US economy, potentially encouraging the Federal Reserve to continue its interest rate cuts.
⚡ However, the strength in the stock market today is tempering safe-haven demand for government debt securities, thus limiting further gains in T-note prices. The easing of US-China trade tensions, following President Trump’s positive remarks, is also undercutting T-note prices by reducing demand for safe-haven assets.
European government bond yields are mixed today. The 10-year German bund yield is up +0.1 basis points to 2.581%, while the 10-year UK gilt yield is down -2.1 basis points to 4.509%.
📊 German September PPI figures showed a decline of -0.1% month-over-month and -1.7% year-over-year, which was weaker than the expected -0.1% month-over-month and -1.5% year-over-year.
Last Friday, S&P Global Ratings downgraded France’s sovereign debt credit rating from AA- to A+, citing elevated budget uncertainty despite the submission of a draft 2025 budget.
The swaps market is discounting a low 2% chance of a 25 basis point rate cut by the European Central Bank (ECB) at its next policy meeting on October 30.
US Stock Movers and Shakers
Most of the prominent technology stocks, often referred to as the Magnificent Seven, are trading higher today, contributing to the overall market strength. Apple (AAPL) has seen gains of over +2%, while Tesla (TSLA), Alphabet (GOOGL), and Meta Platforms (META) are all up by more than +1%. Amazon.com (AMZN) is up +0.74%, and Microsoft (MSFT) has added +0.33%.
Chipmakers and AI infrastructure stocks are also performing well, lending support to the broader market rally. Super Micro Computer (SMCI) is leading the gainers in the S&P 500, up more than +7%. ON Semiconductor (ON) is a top performer in the Nasdaq 100, with gains exceeding +4%. Micron Technology (MU), Lam Research (LRCX), and KLA Corp (KLAC) are all up more than +3%. Additionally, Intel (INTC), Microchip Technology (MCHP), and ARM Holdings Plc (ARM) are showing gains of more than +2%.
Cryptocurrency-related stocks are climbing today, mirroring a more than +3% increase in the price of Bitcoin, which had previously fallen to a 3.75-month low last Friday. Consequently, Coinbase Global (COIN), Galaxy Digital (GLXY), MARA Holdings (MARA), Riot Platforms (RIOT), and MicroStrategy (MSTR) are all up by more than +3%.
Celcuity Inc. (CELC) experienced a substantial surge of over +51% after reporting statistically significant improvements in a trial evaluating its gedatolisib drug in combination with palbociclib and fulvestrant for the treatment of breast cancer patients.
Sable Offshore Corp. (SOC) is up more than +6% following support from the US Secretary of Energy, Wright, for the company’s efforts to restart one of its California oil projects, which is currently awaiting state approval.
Cleveland-Cliffs (CLF) saw an increase of over +15% after reporting a third-quarter adjusted loss per share of -45 cents, which was a narrower loss than the consensus estimate of -47 cents.
Lululemon Athletica (LULU) is up more than +4% after BNP Paribas Exane upgraded the stock to neutral from underperform.
Cooper Cos. (COO) is trading higher by more than +4% after a report from the Wall Street Journal indicated that Jana Partners has acquired a stake in the company and intends to advocate for strategic alternatives.
nCino (NCNO) is up more than +4% following an upgrade from Raymond James, which moved the stock to strong buy from outperform with a price target of $36.
Hologic (HOLX) is experiencing gains of over +2% on news that Blackstone and TPG Inc are in advanced negotiations to acquire the company.
Rivian Automotive (RIVN) is down more than -2% after Mizuho Securities downgraded the stock to underperform from neutral, setting a price target of $10.
Skyworks Solutions (SWKS) is down more than -1% after Mizuho Securities downgraded the stock to underperform from neutral, with a price target of $60.
Progressive Corp (PGR) is down more than -1% after Morgan Stanley downgraded the stock to underweight from equal weight, assigning a price target of $214.
Astera Labs (ALAB) is down nearly -1% after Barclays downgraded the stock to equal weight from overweight.
Upcoming Earnings Reports (October 20, 2025)
- AGNC Investment Corp (AGNC)
- BOK Financial Corp (BOKF)
- Cleveland-Cliffs Inc (CLF)
- Crown Holdings Inc (CCK)
- RLI Corp (RLI)
- Steel Dynamics Inc (STLD)
- Summit Therapeutics Inc (SMMT)
- W R Berkley Corp (WRB)
- Wintrust Financial Corp (WTFC)
- Zions Bancorp NA (ZION)
Expert Summary
Today’s markets are buoyed by easing US-China trade tensions and positive Q3 earnings outlooks, alongside robust economic data from China. While the US government shutdown introduces uncertainty, investor focus remains on corporate performance and the widely anticipated Federal Reserve rate cut.