U.S. Stocks Extend Rally to Fresh Record Highs on Trade Deal Optimism
U.S. equities extended their rally to fresh record highs on Monday, driven by renewed optimism surrounding a potential trade agreement between the U.S. and China. Investor sentiment remained buoyant, lifting major indices across the board. The Dow Jones Industrial Average rose 0.71% to close at 47,544, while the S&P 500 gained 1.23% to finish at 6,875. The Nasdaq Composite outperformed, climbing 1.86% to 23,637. In currency markets, the U.S. Dollar Index edged lower by 0.08%, settling at 98.71. Treasury yields also declined slightly, with the 2-year yield down 0.9 basis points to 3.482%, and the 10-year yield slipping 0.6 basis points to 3.974%, reflecting a modest shift toward safe-haven assets. Commodities were mixed but remained near recent elevated levels. Brent fell 0.26% to $65.42, and WTI crude declined 0.31% to $61.13, while gold pulled back again to close below the $4,000 mark, down 3.17% to close at $3,982.21.
Fed in Focus for Markets in the Next Few Sessions
The Federal Reserve Bank is very much in focus for investors in the next few sessions, as a highly anticipated 25-basis-point rate cut is expected to be delivered. Markets are pricing in a 97.3% chance that the FOMC will cut rates tomorrow, and it would be a huge surprise if they did not deliver on that expectation. Most traders are now looking at the statement from the committee and the updates we get from Fed Chair Jerome Powell in the press conference for more forward guidance on anticipated cuts in December and the first few months of 2026. The risk still seems to sit with a less dovish FOMC, as markets look at a falling job market in the U.S. for more rate cuts. However, the lack of data on that front from the continuing government shutdown and the fact that inflation still remains higher than the committee would like could result in a much more hawkish outlook from the Fed, which could hit the continuing move higher for equity markets and push the dollar higher.
Quiet Calendar Day Ahead of Central Bank Updates
It is another quiet calendar day for investors today ahead of a raft of central bank updates later in the week. There is very little on the schedule to pull back from what has been a positive start to the week, and traders are expecting to see markets again push forward on the Asian open. There is very little scheduled in the Asian and London sessions, but geopolitical updates will keep volatility at elevated levels as investors continue to focus on positive trade updates from Malaysia. Some data is due once the New York session opens, with the Richmond Manufacturing Index expected to print at -14, and we may see the CB Consumer Sentiment number (expected 93.9), although with the government shutdown still running, that is in doubt.
