Markets Set To Face Trade Talks, Tech Earnings & Fed Meeting

Good morning investors,

Markets surge into the week's most consequential earnings season yet as Trump and Xi appear poised to strike a trade deal that could eliminate the November 1st tariff threat. The framework emerging from weekend negotiations suggests both sides want resolution, sending futures soaring and setting the stage for Big Tech to validate or challenge the AI narrative that has driven valuations to record highs. With the Fed's rate cut virtually guaranteed Wednesday, the stars align for another leg higher if earnings deliver.

Dow ($DIA ( ▲ 0.23% )) futures jump 238 points, S&P 500 ($SPY ( ▲ 0.5% )) futures climb 0.8%, and Nasdaq ($QQQ ( ▲ 0.75% )) futures surge 1.3% as Treasury Secretary Bessent confirms a "very successful framework" for Thursday's Trump-Xi summit. The potential deal includes China delaying rare earth export controls for a year, cancellation of Trump's threatened 100% tariffs, resumption of Chinese soybean purchases, and possibly TikTok resolution. Chipmakers lead the rally with Nvidia, Broadcom, and AMD each gaining 2% premarket.

The optimism builds on Friday's record closes that saw the Dow breach 47,000 and the S&P 500 touch 6,800 for the first time. September's CPI coming in at 3.0% versus 3.1% expected, with core also at 3.0%, keeps the Fed on track for Wednesday's expected quarter-point cut with 97.6% probability priced by markets.

This week brings the triple threat of Fed decision, Big Tech earnings, and Trump-Xi summit that could reshape market dynamics through year-end. Microsoft, Apple, Alphabet, Amazon, and Meta all report, carrying the weight of AI expectations that have driven the Magnificent Seven to extreme valuations. Their results will either validate the transformation narrative or expose dangerous concentration risk.

The Fed meets without September jobs data due to the shutdown, now the second-longest on record with federal workers missing paychecks. I believe that the cut this week is a done deal in the eyes of both the market and the fed. While the fed has no access to the labor market, I believe the CPI data gave them enough confidence for one more 25 bps cut as the private labor market data that we have got during the shutdown, has been showing signs of slight deterioration.

President Trump declared from Air Force One: "I have a lot of respect for President Xi, and we are going to come away with the deal." The emerging framework represents significant de-escalation from both sides, with China potentially delaying rare earth restrictions that threatened to cripple U.S. technology manufacturing while Trump abandons the 100% tariff escalation.

Rare earth miners tumble premarket with Critical Metals down 8.5%, USA Rare Earth falling 7.2%, and MP Materials declining 5.3% as the strategic leverage evaporates. Wolfe Research's Tobin Marcus calls the outcome "better-than-expected" and "bullish for markets this week, assuming the Trump-Xi meeting goes well."

Swiss pharmaceutical giant Novartis agreed to acquire Avidity Biosciences for $72 per share cash, a 46% premium totaling $12 billion. The deal brings Avidity's innovative RNA therapeutics targeting muscle tissue, with Novartis raising its 2024-2029 sales growth forecast to 6% from 5%. The acquisition follows $23 billion in U.S. infrastructure investment pledges and deals with Anthos and Regulus, signaling aggressive expansion in next-generation therapeutics.

Huntington Bancshares announced a $7.4 billion all-stock acquisition of Cadence Bank, creating a top-ten institution with $276 billion in assets. The $39.77 per share deal continues 2025's banking consolidation wave as mid-sized institutions seek scale to compete with Wall Street giants. Cadence shares rise 5% premarket as investors recognize the strategic logic of combining amid hopes for regulatory easing.

I continue expecting choppiness and volatility through mid-November as markets digest earnings, Fed signals, and shifting macro sentiment. This consolidation phase should prove healthy, setting up a push toward new highs into year-end. The Fed's dovish stance provides critical support with another cut this week reinforcing liquidity across risk assets.

Technology earnings represent the defining moment for AI-led expansion. Microsoft's Azure trajectory, Amazon's AWS momentum, and Google's quantum computing breakthrough will provide crucial reads on corporate tech spending sustainability. Beyond mega-caps, companies like Snowflake, MongoDB, CrowdStrike, and Palo Alto Networks emerge as secondary AI beneficiaries enabling rather than just participating in transformation.

The convergence of trade resolution, Fed accommodation, and Big Tech earnings creates a powerful setup for risk assets if execution matches expectations. Friday's cooler CPI cleared the path for Wednesday's rate cut while weekend trade negotiations eliminated the November 1st tariff cliff. Now everything depends on whether the Magnificent Seven can justify valuations that assume AI transforms everything.

The underlying trend remains firmly bullish supported by strong fundamentals and dovish Fed policy. Near-term volatility through mid-November represents consolidation, not crisis. Technology continues exceeding expectations, confirming AI-driven expansion is accelerating rather than peaking. As we approach year-end, the combination of supportive policy, advancing innovation, and seasonal strength creates conditions for potential new all-time highs.

Yet concentration risk looms large. If Big Tech disappoints this week, the narrow market foundation could crack quickly. Selective positioning in the AI trade remains essential as divergent sector performance creates both opportunities and risks beneath calm index surfaces.

As always, feel free to reach out with questions about positioning for these evolving market dynamics.

Best regards,

Dan Sheehan

[email protected]

This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.