US Futures Gain Ahead of Fed Rate Cut, Megacap Tech Earnings, and Trump-Xi Meeting

US stock futures edged higher during Monday premarket trading, as traders brace for a busy week of earnings reports, a possible Federal Reserve rate cut, and high-stakes diplomacy between the US and China.

Futures linked to the S&P 500 increased by approximately 0.9%, while Nasdaq 100 futures rose nearly 1.2%. The Dow Jones Industrial Average futures gained around 0.7%. Market momentum remains buoyant after all three major indexes hit record highs on Friday.

The Dow closed above 47,000 for the first time, soaring 472 points. Meanwhile, the S&P 500 approached the 6,800 level, and the Nasdaq Composite increased by over 1%.

Expectations for the Federal Reserve

Markets are pricing in a 25-basis-point rate cut during the Fed's upcoming meeting this week. This expectation follows a softer inflation report for September, which showed inflation easing more than anticipated last week. Additionally, concerns about a weakening US labour market are influencing the outlook.

According to the CME FedWatch tool, 97.3% of market participants expect the Fed to cut rates to a range of 3.75% to 4%. The potential move reflects investor hopes that the central bank will pause or pivot its tightening cycle amid economic uncertainties.

Earnings Season: A Strong Outperformance

This week's earnings reports will be closely watched, especially from the so-called 'Magnificent Seven' – Apple, Microsoft, Alphabet, Amazon, and Meta. Investors are eager to gauge the latest developments in artificial intelligence and tech innovation.

Beyond tech, several sectors including oil, healthcare, financials, heavy machinery, and beverages will also release quarterly results. Impressively, around 85% of S&P 500 companies that have reported so far have beaten profit forecasts — the highest proportion in over four years, according to Bloomberg Intelligence.

This strong earnings trend is a key driver behind the recent outperformance of the index, and many analysts believe this momentum will persist in the near term.

The Trump-Xi Summit and Potential Trade Breakthrough

A high-stakes meeting between US President Donald Trump and Chinese President Xi Jinping in South Korea this week could mark a pivotal moment in US-China relations. US Treasury Secretary Scott Bessent indicated that a 'substantial framework' has been reached to avoid further tariffs, raising hopes for a trade de-escalation.

Bessent stated: 'I believe we've reached a very substantial framework that will avoid [a tariff hike] and allow us to discuss that and many other things with the Chinese.' The market is optimistic about a potential easing of tensions, which could reduce the risk of a renewed trade war.

Analyst Terry Haines of Pangaea Policy noted that while these 'nice noises' are encouraging, the overall outlook remains cautious. He warned that the current situation might only sustain a trade truce for a few more months without leading to meaningful progress or stability.

Gold Prices Decline Amid Trade Negotiation Hopes

Gold, often seen as a safe haven, experienced a sharp decline earlier in the week. Analysts suggest that the recent surge in gold prices may have run its course, as the market shifts focus towards a potential US-China trade agreement. The record rally has been driven by geopolitical tensions and economic uncertainties, but many believe it has advanced too far, too fast.

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