Dow Jones & Nasdaq 100 Surge on US-China Trade Deal Hopes

US stock futures rallied to new all-time highs in early morning trading on Monday, October 27. The US and China reached a consensus framework for a trade deal on Sunday, October 26, fueling demand for risk assets.

Crucially, trade negotiators reached a framework agreement ahead of President Trump’s planned meeting with Chinese President Xi Jinping on Thursday, October 30. Sunday’s news fueled hopes for a trade deal.

A US-China trade agreement could lower or remove existing tariffs, potentially boosting Chinese exports and US shipments of chips and other US products to China.

The Nikkei 225 joined US stock futures at all-time highs, breaking above 50,000 for the first time.

US and China Trade Deal Framework Cuts Risk of Full-Blown Trade War

China’s Vice Minister of Commerce and US Treasury Secretary Scott Bessent announced progress toward a trade agreement.

CN Wire reported on the latest trade developments, noting that:

“The recent U.S.-China negotiations in Malaysia concluded positively, with both sides reportedly reaching a preliminary consensus on key issues such as export controls, fentanyl, and shipping levies.”

CN Wire also quoted analysts’ comments on Sunday’s news. Vishnu Varathan, Head of Macro Research (Asia ex-Japan), Mizuho Bank, reportedly stated:

“I suppose the sounds coming through from Trump will argue well for both sides – as unnecessary pain is averted. Chinese equities will probably have reasons to be buoyant as imminent threats to bulls have been subdued.”

Key components of the framework potentially include, but are not limited to:

• The US is to withdraw a 100% tariff hike, effective on November 1.
• China to delay restrictions on rare earth minerals and magnet exports for 12 months.
• China to import US soybeans.
• Agreement to fentanyl-related measures.

Traders should now turn their attention to Thursday, when President Trump and President Xi could potentially sign a trade deal.

US Stock Futures Eye Three-Day Winning Streaks

US stock futures could extend their winning streaks to three sessions later today as the latest trade developments lifted sentiment. The Dow Jones E-mini rose 214, the Nasdaq 100 E-mini jumped 212 points, and the S&P 500 E-mini climbed 42 points.

The latest US-China trade developments coincided with upbeat Chinese industrial profit numbers, contributing to the morning gains. Industrial profits jumped 3.2% year-on-year from January to September after rising 0.9% in August. Notably, profits soared 21.6% year-on-year in September, up from 20.4% in August.

Rising profits could ease deflationary pressures, boost job creation and wages, potentially driving domestic consumption. The combination of increased external demand for Chinese goods and a rebound in consumer spending could raise expectations that Beijing will achieve its 5% GDP growth target.

US Data and the Fed in Focus

Across the Pacific, US economic data will draw interest ahead of Wednesday’s Fed interest rate decision. Economists forecast durable goods orders to rise 0.3% month-on-month in September after increasing 2.9% in August.

A higher-than-expected reading could signal robust demand, easing fears of stagflation. On the other hand, an unexpected drop in orders would reflect a sharp drop in demand, potentially weighing on risk assets.

However, the September report is unlikely to influence expectations of an October Fed rate cut. Markets are betting on back-to-back Fed rate cuts in October and December, sending US stock futures higher.

According to the CME FedWatch Tool, the probability of a 25-basis point rate cut in October stands at 96.7%. Furthermore, the probability of a 25-basis point rate cut in November stands at 95.8%.

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

Following the morning rally, US stock futures traded well above key technical levels, signaling bullish momentum.

However, the near-term trends will hinge on President Trump’s meeting with President Xi, the Fed’s monetary policy stance, and corporate earnings. Key levels traders should monitor include:

Dow Jones

• Resistance: the October 27 record high of 47,775, then 48,000.
• Support: 47,500, 47,000, the 50-day EMA (46,159).

Nasdaq 100

• Resistance: October 27 record high of 25,768, then 26,000.
• Support: 25,500, 25,000, the 50-day EMA (24,525).

S&P 500

• Resistance: October 27 record high of 6,890, then 7,000.
• Support: 6,750, the 50-day EMA (6,636), and 6,500.

Market Outlook: US Data, Earnings, Trade News, and the Fed in Focus

Traders should brace for a pivotal week ahead, with key events, economic data, and corporate earnings set to fuel market volatility.

Wednesday’s Fed interest rate decision and President Trump’s meeting with President Xi will be crucial for market trends. However, the so-called MAG7 (Mega Cap 7 tech firms) will release earnings this week, also key for US stock futures and the Nasdaq 100 in particular.

Follow our live coverage and consult the economic calendar for real-time market updates.