U.S. Stocks Rally, Inflation Cools, as Trump-Xi Trade Talks Loom
U.S. stock markets continued their upward trajectory yesterday, bolstered by a tamer-than-expected inflation report and increasing confidence in potential interest rate cuts, even as trade tensions with Canada escalate and a crucial trade agreement with China nears its expiration.
The consumer price index (CPI) report showed a 3% annual increase in September, up from 2.9% the previous month, but still below estimates and signaling a potential easing of inflationary pressures. This has led traders to widely anticipate rate cuts at the Federal Reserve’s meeting later this week and in December. Major indexes—the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average—rose approximately 2% for the week, with the Dow Jones closing above 47,000 for the first time. A strong earnings season, with 87% of companies exceeding Wall Street expectations, has also contributed to the positive market sentiment; you can find more information about earnings seasons and their impact on the market here.
However, President Donald Trump’s recent imposition of a 10% tariff on Canadian goods, in response to an advertisement, casts a shadow over the optimistic outlook. Economists warn that such tariffs could lead to higher consumer prices. “Inflation might not be slowing but it’s not surprising to the upside anymore,” said David Russell, global head of market strategy at TradeStation. The U.S. government shutdown continues to limit the availability of key economic data, such as the jobs report, creating uncertainty about the overall health of the economy.
Adding to the global economic picture, China’s industrial profits surged 21.6% in September, the largest increase since November 2023, while HSBC announced a $1.1 billion provision related to the Bernard Madoff fraud scheme. Furthermore, President Trump is scheduled to meet with Chinese President Xi Jinping on October 30th at the Asia-Pacific Economic Cooperation (APEC) Summit—their first in-person meeting since Trump’s return to office—as a trade detente between the two nations approaches its November 10th expiration date. White House press secretary Karoline Leavitt stated that the meeting will be a critical opportunity to discuss the future of trade relations.
