On the evening of October 20, Beijing time, US stocks opened higher on Monday. Reports indicating that President Trump has exempted tariffs on several goods have boosted market sentiment. Investors are closely watching the earnings reports from several well-known companies and inflation data this week.
The Dow Jones Industrial Average rose by 122.27 points, or 0.26%, closing at 31,312.88 points; the Nasdaq Composite surged by 171.619 points, or 0.76%, ending at 22,851.593 points; and the S&P 500 increased by 26.04 points, or 0.39%, finishing at 6,690.05 points.
A report on the progress of international trade relations has helped uplift market sentiment at the week's start, noting that President Trump has exempted tariffs on dozens of products in recent weeks. The report also indicated that the Trump administration is considering additional exemptions on hundreds of more goods, reflecting a growing consensus among U.S. officials that tariffs on certain non-domestic products should be reduced.
Last week saw significant fluctuations in the US stock market, but it ended on a high note as Trump expressed optimism about a potential trade agreement. US Treasury Secretary Mnuchin stated on Friday that he believes the situation regarding U.S.-China relations has "de-escalated" and that a high-level meeting is likely within the next week.
These comments from Trump and Mnuchin suggest to traders that the plan Trump previously threatened for an additional 100% tariff on Chinese imports starting November 1 may not take place. Analysts believe this move indicates Washington's efforts to alleviate concerns over a potential worsening of the trade war and to prevent domestic economic damage.
Several factors contributed to last week’s market volatility, including heightened international tensions, a regional banking credit crisis, and a sell-off of certain popular AI stocks. A strong start to the third-quarter earnings season seems to be boosting market sentiment, while investors also anticipate a 25 basis point rate cut from the Federal Reserve at its meeting later this month.
The Cboe Volatility Index (VIX), which measures market panic levels, briefly spiked above 28 on Friday before falling back below 21 as US stocks rose. On Monday, the VIX was trading around 20.
Katie Nixon, Chief Investment Officer at Northern Trust, noted in a report to clients: “Although US stocks rebounded slightly last Friday, risk assets reflect increased geopolitical uncertainty—especially concerning international trade relations. The trade dispute poses significant economic risks for both sides, making a mutually acceptable compromise crucial.”
Investors were also trying to shake off concerns regarding credit risks last week. On Thursday, news of a credit crisis at regional banks sparked a broader market sell-off. Panic ensued after Zions Bank and Western Alliance disclosed issues related to bad loans, causing the stock prices of several financial giants and regional banks to fluctuate lower before rebounding on Friday.
The U.S. government shutdown has now entered its fourth week, with Democrats and Republicans still at odds over federal healthcare subsidy issues.
Katie Nixon remarked, “So far, investors seem unconcerned, but many economists worry that a prolonged shutdown could impact quarterly GDP growth. However, most also acknowledge that this would be a temporary slowdown, potentially followed by a period of catch-up growth.”
This week, several large companies, including Netflix, Coca-Cola, Tesla, and Intel, are set to report their quarterly earnings. Additionally, the Consumer Price Index for September is scheduled for release on Friday, and it is expected to show continued high inflation. Given the disruption caused by the government shutdown, traders will pay particular attention to this report.