Dow Jones & Nasdaq 100 Surge on US-China Trade Deal Hopes
“I suppose the sounds coming through from Trump will argue well for both sides – as unnecessary pain is averted. Chinese equities will probably have reasons to be buoyant as imminent threats to bulls have been subdued.”
Key components of the framework potentially include, but are not limited to:
- The US is to withdraw a 100% tariff hike, effective on November 1.
- China to delay restrictions on rare earth minerals and magnet exports for 12 months.
- China to import US soybeans.
- Agreement to fentanyl-related measures.
Traders should now turn their attention to Thursday, when President Trump and President Xi could potentially sign a trade deal.
US Stock Futures Eye Three-Day Winning Streaks
US stock futures could extend their winning streaks to three sessions later today as the latest trade developments lifted sentiment. The Dow Jones E-mini rose 214, the Nasdaq 100 E-mini jumped 212 points, and the S&P 500 E-mini climbed 42 points.
The latest US-China trade developments coincided with upbeat Chinese industrial profit numbers, contributing to the morning gains. Industrial profits jumped 3.2% year-on-year from January to September after rising 0.9% in August. Notably, profits soared 21.6% year-on-year in September, up from 20.4% in August.
Rising profits could ease deflationary pressures, boost job creation and wages, potentially driving domestic consumption. The combination of increased external demand for Chinese goods and a rebound in consumer spending could raise expectations that Beijing will achieve its 5% GDP growth target.
US Data and the Fed in Focus
Across the Pacific, US economic data will draw interest ahead of Wednesday’s Fed interest rate decision. Economists forecast durable goods orders to rise 0.3% month-on-month in September after increasing 2.9% in August.
A higher-than-expected reading could signal robust demand, easing fears of stagflation. On the other hand, an unexpected drop in orders would reflect a sharp drop in demand, potentially weighing on risk assets.
However, the September report is unlikely to influence expectations of an October Fed rate cut. Markets are betting on back-to-back Fed rate cuts in October and December, sending US stock futures higher.
According to the CME FedWatch Tool, the probability of a 25-basis point rate cut in October stands at 96.7%. Furthermore, the probability of a 25-basis point rate cut in November stands at 95.8%.
Key Technical Levels for Dow Jones, Nasdaq 100, and S&P 500
Following the morning rally, US stock futures traded well above key technical levels, signaling bullish momentum.
However, the near-term trends will hinge on President Trump’s meeting with President Xi, the Fed’s monetary policy stance, and corporate earnings. Key levels traders should monitor include:
Dow Jones
- Resistance: the October 27 record high of 47,775, then 48,000.
- Support: 47,500, 47,000, the 50-day EMA (46,159).