A wave of optimism on Wall Street lifted U.S. stocks, supported by strong results for major companies and signs of easing tensions between the world’s two largest economies, while U.S. bond yields fell. As the quarterly earnings season enters its peak, about 85% of companies included in the S&P 500 index have beaten earnings expectations year-to-date, helping to bolster the rally in stocks, and the index posted its best two-day gains since June. Sentiment also improved on expectations that the trade war between the United States and China will ease as the two countries return to the negotiating table. US President Donald Trump repeated his threat to raise tariffs on Chinese goods “if a deal is not reached” by November 1, but stressed his plans to meet Chinese President Xi Jinping next week. Markets were in turmoil earlier this month when Trump raised the prospect of very high tariffs, citing what he described as China’s “hostile restrictions” on its exports. “We’re seeing normal seasonal swings in October, but they’re relatively shallow by historical standards as the buy-the-dip mentality still seems to be dominant,” says Rick Gardner of RGA Investments. He added that inflation data expected on Friday could take on added importance in light of the shutdown in the release of government data due to the shutdown, which anticipates a rate cut by the Federal Reserve in October, and noted that the profits of major technology companies will be a big test to see how much spending on artificial intelligence translates into real profits. Gains for tech stocks, decline in yields “It’s good to have an earnings season,” said Callie Cox of Ritholtz Wealth Management. “Analysts have been deprived of data for weeks, and when data is less available, overreaction to news increases. A steady flow of fundamental signals is an underappreciated stabilizing factor for markets.” The S&P 500 index rose 1.1%. Apple hit its first record high in 2025 after Loop Capital raised its recommendation on the stock to “buy” in the latest indication of improved demand for iPhone devices. The index of large technology companies also rose 1.6%, and the Russell 2000 index of small companies rose 1.9%. The yield on 10-year US Treasury bonds fell three basis points to 3.98%. Gold jumped, while soybean futures rose on farmers’ optimism that Trump will strike a deal with China to re-export halted US products. Optimism for an upward movement in stocks. Nationwide’s Mark Hackett said the overall picture remained positive for equity markets despite periods of volatility, explaining that he believed any temporary weakness was being countered with strong buying, suggesting that individual investors continued to buy despite institutional caution. He added: “It seems to me that the market is preparing for an upward breakout move, and from my point of view it is easier to imagine its rise towards the end of the year and the beginning of 2026.” He pointed out that trade tensions continue to fuel investor sentiment and volatility, but the declines remain short-term as individual investors see opportunities to add risk, despite the decline in investment confidence indicators according to the latest surveys. Analysts at Deutsche Bank reported that overall equity positions fell last week, and that sentiment turned negative, while Morgan Stanley’s Michael Wilson said that real progress on the US-China trade deal, and stability in earnings outlooks, must be achieved to avoid another correction in the market. “The combination of improved growth and earnings prospects, supportive policies, and investors rushing to buy on dips warrants a more positive medium-term outlook,” said Jason Draho of UBS Global Wealth Management. Results for small companies take center stage Tesla is one of the most prominent companies to announce its results this week, marking the start of earnings season for giant tech companies. Intel and Texas Instruments are likely to address China’s tighter controls on rare earth exports when they announce the results. John Stoltzfus of Oppenheimer Asset Management said results from major U.S. companies looked promising, adding that beating expectations despite ongoing risks indicated “enough solidity to give stocks a ticket to the upside.” JP Morgan analysts, led by Mislav Matica, believed that the momentum of economic activity improved during the last quarter, and that positive surprises are likely in the current earnings season. Louis Navellier of Navellier & Associates said: “Momentum remains positive and has become earnings-driven, which could push the market upwards until the end of the year unless major unexpected shocks occur.” “Recent volatility in stocks despite a strong start to earnings season reflects investors’ continued sensitivity to policy surprises, news headlines and the potential for disappointing results,” said Doug Beth of Wells Vago Investment Institute. He added: “We expect some surprises and setbacks to occur, but investors need to look past the head noise and focus on the existing positive trends.” “The main feature of the third-quarter earnings season will be continued solid earnings,” said Glenmede’s Jason Pride and Michael Reynolds, noting that “the S&P 500 is on track for high-single-digit earnings growth on a year-over-year basis.” They added that small companies finally appear to be on their way to the spotlight, as Russell 2000 index earnings are expected to rise more than 35% in the third quarter, thanks to new fiscal stimulus and the Federal Reserve’s monetary easing cycle. Optimism depends on the growth of small companies and the stability of the economy. Bloomberg Intelligence’s Michael Kasper and Nathaniel Wellenhofer said small companies are now required to prove their ability to deliver growth in line with their lofty valuations, and they stressed that third-quarter results will be crucial. “The requirements are higher than the previous quarter, but the gap with large companies is expected to close by mid-2026, which is a prerequisite for continued performance.” Excellent indicator. Jeff Chen and Philip Hodges of BlackRock System said that the rise in stocks since the drop in April is a reward for investors who have weathered the waves of uncertainty and rates, stressing that the economy has shown sufficient resilience to support a gold scenario that combines a sufficient slowdown to lower interest rates and not enter a recession. They pointed out that the easing of monetary policy and the artificial intelligence revolution pushed the markets to new record levels, but the apparent rise was hidden behind significant internal fluctuations, as the average individual stocks in the index fell by up to 15%, even though the index as a whole did not fall by more than 5% since its lowest levels reflected in an April market. and emphasizes the importance of active and flexible management.” Look at inflation data and the Fed’s position after it was delayed due to the US government shutdown. The Labor Department is scheduled to release consumer price index data for September on Friday, after it was scheduled to be published on October 15. These data will provide the Federal Reserve with a crucial element in gauging inflation before its meeting next week. Experts polled by Bloomberg expect the core price index, which excludes food and energy, to rise 0.3% for the third straight month, keeping the annual rate at 3.1%. Oscar Muñoz of TD Securities said: “The core price index for September may have seen a slight slowdown due to the drop in service prices, which is the transmission of additional tariffs to commodity prices partially offset, while energy prices lifted the general index.” Muñoz added that he still expects a rate cut of 25 basis points at next week’s meeting, given the rising labor market risks and the need for monetary policy to recalibrate further. Chris Larkin of Morgan Stanley’s e-Trade said that traders will temporarily focus on earnings results, especially after news of bank loan losses caused volatility in the financial sector last week. He added: “Volatility has recently become the dominant feature, but beating expectations from major companies and easing US-China tensions could help the market regain its balance.”
US stock indexes rise supported by strong corporate results
