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Briefing.com Summary:
*U.S. and China strike framework agreement for trade deal that will forestall an additional 100% tariff on imported Chinese goods.
*GOOG, META, MSFT, AAPL, and AMZN headline a huge week of earnings reports.
*The FOMC is widely expected to cut the target range for the fed funds rate by 25 basis points to 3.75-4.00% on Wednesday.
The stock market is set for a solidly higher open to begin the week. We probably would have been saying that anyway, knowing a rate cut by the Fed is coming on Wednesday, but there is added context to the bullish bias that stems from the report from the Trump administration that the framework of a trade agreement between the U.S. and China has been reached.
The framing implies the U.S. won't impose an additional 100% tariff on imported Chinese goods, that China will buy lots of soybeans, and that it will delay its rare earth export controls. Nothing has been finalized. President Trump and President Xi are meeting on Thursday and are expected then to make a formal announcement.
Sensing the formality of it all, the market is bulled up this morning
Currently, the S&P 500 futures are up 55 points and are trading 0.8% above fair value, the Nasdaq 100 futures are up 327 points and are trading 1.3% above fair value, and the Dow Jones Industrial Average futures are up 239 points and are trading 0.6% above fair value.
Mega-cap stocks are powering the early advance and will undoubtedly be market movers as the week progresses. Alphabet (GOOG), Meta Platforms (META), and Microsoft (MSFT) report their quarterly results after the close on Wednesday, while Apple (AAPL) and Amazon.com (AMZN) report after the close on Thursday.
These reports follow the FOMC meeting on Wednesday and will be supplemented by earnings reports from roughly a third of S&P 500 companies this week. Translation: the news flow this week will be extraordinary, both in terms of quantity and impact.
The Bank of Canada, Bank of Japan, and ECB will also be holding policy meetings. The Fed, for its part, is widely expected to cut the target range for the fed funds rate by 25 basis points to 3.75-4.00%, and there is some speculation that there might also be an announcement pertaining to the cessation of its quantitative tightening campaign.
The Treasury market will have a keen interest in the central bank decisions, partly because it won't have any government economic data to focus on due to the extended shutdown. The central bank decisions will keep it busy along with several auctions. Today features a $69 billion 2-yr note auction (results at 11:30 a.m. ET) and a $70 billion 5-yr note auction (results at 1:00 p.m. ET). There will also be a $44 billion 7-yr note auction on Tuesday.
The 2-yr note yield is up two basis points this morning to 3.50%, and the 10-yr note yield is up two basis points to 4.02%.
Those moves aren't causing a stir. Stocks are ready to ride on their bull market rails.
