Wall Street Builds on Record Lifts Ahead of a Packed Market Week
Stocks are marching toward fresh records as investors brace for a week packed with potentially market-moving events. The S&P 500 is up around 1% in midday trading, the Dow Jones Industrial Average has gained about 0.5%, and the Nasdaq Composite has risen more than 1.5%. All three indices are pressing against new all-time highs following strong session closes on Friday.
The optimism isn’t limited to the United States. Asian markets also climbed ahead of a high-stakes meeting between U.S. and Chinese leaders later this week, with traders hoping the talks could ease Sino-American tensions and keep the global economy on its growth trajectory.
Finance Secretary Scott Bessent signaled that there is a “framework” for President Donald Trump and Chinese President Xi Jinping to discuss, while Trump himself indicated confidence about a constructive outcome. While these diplomatic signals add a hopeful note, investors recognize that a long list of risk factors could tilt sentiment at any moment this week.
Beyond diplomacy, a central driver of the rally remains expectations for monetary policy to support a cooling economy. The Federal Reserve is anticipated to cut the federal funds rate by a quarter of a percentage point at its upcoming decision, marking a second consecutive rate cut. Traders largely expect the move, but inflation dynamics and policy tilt could complicate the picture if price pressures accelerate.
Inflation data released recently provided a modestly better-than-expected read, stoking optimism that price growth is easing without derailing the labor market. Yet a government shutdown could complicate the trajectory of further rate cuts, potentially clouding the path for continued gains in the near term.
On the earnings front, investors are watching a wave of results from technology and consumer brands. Keurig Dr Pepper impressed traders by reporting quarterly results that met expectations, aided by higher prices for its popular K-Cup products. The week’s lineup of major releases includes Alphabet, Microsoft, Meta Platforms on Wednesday, and Amazon and Apple on Thursday. The market’s verdict on these powerhouse names will hinge on their growth trajectories and the return on the hefty investments they’re making in artificial intelligence.
Rising optimism about AI has been a double-edged sword for markets. While companies like Nvidia have surged this year on AI-related demand, concerns about a potential bubble persist. The broader market will need sustained earnings strength to justify the up-leg in stock prices as investors weigh the durability of AI-driven growth against the risk of performance normalization.
In the latest notable moves, merger activity contributed to the day’s gains. Cadence Bank rose after Huntington Bancshares said it would acquire the bank for about $7.4 billion in stock. Avidity Biosciences surged after Novartis agreed to buy the San Diego-based company for $12 billion, with the deal spotlighting the ongoing reshuffle in the biopharma space as M&A continues to be a key market catalyst.
International markets mirrored U.S. optimism but with variance. Shanghai and Hong Kong posted solid advances, while Japan’s Nikkei rose enough to push above notable milestones, aided by domestic policy expectations that favor market-friendly reforms. The yen and other bond markets have shown tentative moves, with the 10-year Treasury yield easing slightly as investors balance growth prospects against inflation and debt considerations.
Gold, a traditional hedge in times of volatility, sagged as risk appetite rose. The metal retreated from its brief flirtation with record highs last week, trading toward the $4,000 per ounce level as investors weighed the new information and policy outlook. This shift underscores how drivers like rate expectations, growth prospects, and exchange rates continue to influence safe-haven assets.
As the week unfolds, the market narrative will likely hinge on: (1) the Fed’s rate decision and accompanying commentary on inflation and growth; (2) commentary from major technology players on AI development and capital expenditure; (3) the U.S.-China dialogue and its potential to ease global trade frictions; and (4) ongoing corporate earnings and potential M&A activity. For now, investors appear willing to lean into risk, betting that a combination of favorable policy momentum and strong earnings can propel markets toward further records.
AP Business Writers Matt Ott and Elaine Kurtenbach contributed to this report.
