Wall Street Goes Risk-On as Trade Optimism Grows: Markets Wrap
(Bloomberg) — Wall Street’s hopes the US and China are nearing a trade deal lifted the riskier corners of the market, with stocks hitting record highs amid a rally in the crypto world. Bonds and gold fell.
The S&P 500 rose almost 1% as Chinese and US trade negotiators have lined up an array of diplomatic wins for Donald Trump and Xi Jinping to unveil at a summit this week. With further Federal Reserve interest-rate cuts on the way, the profit outlook is looking increasingly brighter.
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American firms appear to be fairly unscathed by tariffs so far, protecting their margins through price increases and cost cuts. As the earnings season rolls in, companies in the US equity benchmark are on course to deliver the highest sales beat ratio since 2021.
The view among strategists is that the strongest earnings and sales growth remains concentrated in technology stocks. On Wednesday and Thursday, five firms that account for about a quarter of the S&P 500 — Microsoft Corp., Alphabet Inc., Meta Platforms Inc., Amazon.com Inc. and Apple Inc. — will report their earnings.
“With the Fed on track to cut rates, extending the run would appear to hinge on this week’s lineup of high-profile earnings releases,” said Chris Larkin at E*Trade from Morgan Stanley. “And it may, barring any surprises in US-China trade negotiations.”
The S&P 500 rose to 6,850. A gauge of the “Magnificent Seven” megacaps jumped 2%. The yield on 10-year Treasuries advanced three basis points to 4.03%. Bitcoin rose 1.7%. Gold fell 2.3%.
Argentina’s markets rallied as President Javier Milei’s party pulled off a strong victory in Sunday’s legislative elections, defying investor fears of a setback that would jeopardize his free-market overhauls and push the nation toward another economic crisis.
A majority of S&P 500 firms typically surpass expectations, but this season stands out considering that analysts had set the bar higher by raising projections heading into the reporting period. Robust earnings and signs of sustained investment in artificial intelligence are countering threats to stocks from trade developments and the government shutdown.
Microsoft, Alphabet, Amazon and Meta are projected to post a combined $360 billion in capital expenditures in their current fiscal years, much of it related to AI. That spending is expected to jump to nearly $420 billion next year, according to analyst estimates compiled by Bloomberg.
“We expect another strong round of mega cap tech earnings reports, given the relentless demand for AI technology and infrastructure,” said Clark Bellin at Bellwether Wealth. “While profitability in AI remains an unknown, investors for right now are willing to overlook this as the AI arms race heats up.”
To Matt Maley at Miller Tabak, the most important issue will be the comments about the future rate of spending on AI from the hyperscalers.
“Expectations are very high on this front, so there are some risks involved,” he said. “However, since there hasn’t been any signals that these companies will back off on their spending, these high expectations seem to be well placed.”
Equity analysts are expected to broaden their earnings revisions to more stocks toward the end of the year and into 2026, according to Morgan Stanley strategists.
“We have high conviction in our rolling recovery thesis, which remains out of consensus,” the team led by Michael Wilson wrote.
The third-quarter earnings season has proved stronger than expected and could deliver results beyond what analysts expected prior to “Liberation Day” in April, when markets plunged on Trump’s tariff plans, according to Deutsche Bank AG strategists led by Binky Chadha.
After two weeks of heavy selling, hedge funds turned net buyers of US equities last week as softer inflation data fueled bets on imminent Fed rate cuts, pushing major indexes to new highs.
The buying was largely driven by short covering rather than fresh long positions, according to Goldman Sachs Prime brokerage desk’s report for the week ending Oct. 24. Macro products, such as indexes and ETFs, accounted for nearly 80% of total net buying. Short positions across ETFs were cut by 5.9%, the sharpest reduction in five months.
Corporate Highlights:
Nvidia Corp. has spent the past three years ensnared in an escalating trade impasse between the US and China that has kept its prized artificial intelligence chips out of a crucial market and cost it billions of dollars in revenue. Now, the same week President Donald Trump plans to meet China’s Xi Jinping to finalize a trade deal between the world’s top two economies, Nvidia will hold one of its biggest AI conferences at a massive convention hall just blocks from the White House. Wall Street analysts are now almost universally bullish on Microsoft Corp., with Guggenheim upgrading the software company to buy from hold ahead of its quarterly results. International Business Machines Corp. is launching a digital assets platform to allow financial institutions, governments and companies to launch blockchain-based services, as crypto activity gathers steam. Huntington Bancshares Inc. agreed to buy Cadence Bank for $7.4 billion, the Ohio bank’s second major acquisition this year to expand in southern and southeastern states and the latest in a string of deals among US regional lenders. American Water Works Co. agreed to buy Essential Utilities Inc. in an all-stock deal valued at about $12 billion. Keurig Dr Pepper Inc. is raising $7 billion from Apollo and KKR to help finance its acquisition of JDE Peet’s NV, aiming to ease investor concerns about taking on too much debt. The beverage maker also expects fiscal 2025 constant currency net sales growth to be in high-single-digit range, up from a previous prediction in the mid-single-digits. Lululemon Athletica Inc. has entered an arrangement with the National Football League and sports merchandiser Fanatics Inc. to develop a line of fan apparel as the yoga-wear retailer searches for new avenues of growth. The chief executive of Organon, the company behind the birth control implant product Nexplanon, has stepped down after an audit committee uncovered improper sales practices related to the medicine. Novartis AG agreed to buy Avidity Biosciences Inc. in a $12 billion deal that’s the Swiss drugmaker’s biggest acquisition in more than a decade and adds several potential blockbuster treatments as generic competition looms for its current top-sellers. Porsche AG gained after the company vowed to reverse months of poor performance with a new chief executive officer and changed course on its EV strategy. Some of the main moves in markets:
Stocks
The S&P 500 rose 0.9% as of 10 a.m. New York time The Nasdaq 100 rose 1.4% The Dow Jones Industrial Average rose 0.6% The Stoxx Europe 600 rose 0.2% The MSCI World Index rose 0.8% Bloomberg Magnificent 7 Total Return Index rose 2% The Russell 2000 Index rose 0.9% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1636 The British pound rose 0.2% to $1.3335 The Japanese yen fell 0.2% to 153.14 per dollar Cryptocurrencies
Bitcoin rose 1.7% to $115,283.86 Ether rose 2.9% to $4,178.67 Bonds
The yield on 10-year Treasuries advanced three basis points to 4.03% Germany’s 10-year yield was little changed at 2.63% Britain’s 10-year yield declined one basis point to 4.42% The yield on 2-year Treasuries advanced three basis points to 3.51% The yield on 30-year Treasuries advanced one basis point to 4.60% Commodities
West Texas Intermediate crude rose 0.4% to $61.77 a barrel Spot gold fell 2.3% to $4,019.64 an ounce ©2025 Bloomberg L.P.
