Dow Jones & Nasdaq 100 Rise with Fed Cut, Eyes on Trump-Xi Negotiations

Japan’s Nikkei 225 Hits Record High as Trump-Xi Talks Loom

Asian markets were broadly higher in morning trading on Thursday, September 18, as investors reacted to the overnight Fed rate cut. The Nikkei 225 rallied 1.34% to strike new highs. However, US-China trade developments took center stage, lifting demand for US stock futures.

Here’s what to watch!

US President Trump and Chinese President Xi Jinping are scheduled to speak on Friday, September 19, raising hopes for a trade deal. Friday’s talks follow an agreed framework to pass control of TikTok to the US. Key topics of discussion could be rare earth minerals, China’s ban on Nvidia chips, Russian oil, the Ukraine war, and tariffs.

Friday’s call could pave the way for a US state visit to Beijing, a potential turning point in the US-China trade war.

CN Wire reported:

“China and the United States are reportedly in the ‘final stage’ of negotiations for a state visit to Beijing by US President Donald Trump, with major deliverables likely including bulk purchases of American goods, particularly Boeing aircraft, according to sources. The visit could also open the door for a reciprocal trip by President Xi Jinping to the US next year, with the timing of Trump’s visit expected to coincide with the APEC summit in South Korea from October 31 to November 1.”

Lower US tariffs on Chinese goods could cool US import prices and boost external demand for Chinese-manufactured goods. Lower import prices could dampen inflationary pressures, supporting a more dovish Fed rate path. 10-year US Treasury yields dipped in morning trading, lifting sentiment. Lower rates make future earnings more valuable, lifting US futures markets.

Markets React: US Stock Futures Rise Post Fed

US stock futures rallied in morning trading on Thursday, September 18, after a mixed overnight session. The Dow Jones E-mini gained 144 points, the Nasdaq 100 E-mini climbed 172 points, while the S&P 500 E-mini advanced 32 points.

The Fed cut interest rates by 25 basis points on Wednesday, September 17. Fed Chair Powell poured cold water on speculation about back-to-back rate cuts in the fourth quarter. However, the Fed’s policy stance could trigger an extended rally across the US equity markets.

The Kobeissi Letter commented on previous Fed rate cuts and market trends, stating:

“Rate cuts have begun at record highs: 2025 now marks the 3rd year since 1996 where rate cuts have happened with the S&P 500 at record highs. The previous 2 years? 2019 and 2024. When the Fed cuts rates within 2% of all-time highs, the S&P 500 has risen an average of +14% in 12 months.”

The Kobeissi Letter also remarked on Powell’s views on the US equity markets, adding:

“And, to top it off, Fed Chair Powell was asked about the potential of a stock market bubble with rate cuts at record highs. Powell’s response: He is focused on containing inflation and unemployment, not the stock market. Asset owners are ready for what’s next.”

A 14% gain would take the S&P 500 to 7,524. However, stalled trade talks, an improving labor market, and sticky inflation could affect demand for risk assets.

Will Jobless Claims Boost Q4 Rate Cut Bets?

Later Thursday, traders brace for US labor market data, the Fed’s main area of interest. Economists forecast initial jobless claims to drop from 263k (week ending September 6) to 240k (week ending September 13).

A larger-than-expected drop in claims may temper expectations of two further Fed rate cuts in the fourth quarter. A less dovish Fed rate path may ease demand for risk assets. On the other hand, a higher claims reading could support multiple policy adjustments in the final quarter, boosting risk appetite.

Key Technical Levels for Dow Jones, Nasdaq 100, and S&P 500

The morning gains reaffirmed the short-term bullish bias. However, momentum hinges on upcoming US data, trade developments, and Fed commentary. For traders, here are the key levels influencing market direction in the coming sessions.

Dow Jones

• Resistance: September 17 record high of 46,637 and then 47,000.
• Support: 46,500, 46,000, and then the 50-day EMA (45,034).

Nasdaq 100

• Resistance: September 16 record high of 24,647 and 25,000.
• Support: 24,500, 24,000, and the 50-day EMA (23,467).

S&P 500

• Resistance: September 16 record high of 6,697 and then 7,000.
• Support: 6,500 and the 50-day EMA (6,425).

September Outlook: US-China Trade Talks and Data in Focus

Traders should closely track the US labor market and inflation-linked data for clues on the Fed’s rate path. Labor market data and inflation numbers could influence bets on multiple Fed rate cuts, affecting demand for risk assets. Beyond the numbers, US-China trade talks will continue to affect market trends.

These key events could make or break the September rally. Follow our live coverage and consult our economic calendar.