Wall Street Rallies Amid Easing US–China Tensions and Earnings Season Optimism
New York — US stocks surged on Monday, extending last week’s rally as trade tensions between Washington and Beijing eased and optimism surrounding the third-quarter earnings season grew stronger.
The S&P 500 gained 1.07%, the Dow Jones Industrial Average climbed 1.12%, and the Nasdaq 100 jumped 1.30%, each hitting their highest levels in over a week. Market sentiment was also supported by declining US Treasury yields, with the 10-year yield falling to 3.98%, alongside record highs in European and Asian markets.
Easing Trade Tensions Rekindle Global Risk Appetite
President Donald Trump’s remarks that relations with China “will be fine” sparked a broad-based rally across global markets. Treasury Secretary Bessent confirmed that the US and China will hold talks in Malaysia this week, ahead of a potential meeting between Trump and President Xi Jinping during the APEC Summit in South Korea later this month.
Investor sentiment further improved after China’s economic data exceeded expectations. GDP grew 4.8% year-on-year in Q3, while industrial production rose 6.5% and unemployment fell to 5.2%. These figures indicate renewed momentum in China’s recovery, strengthening the global growth outlook.
“China’s economic data breathed new life into market optimism,” said an analyst at Bloomberg Intelligence. “Along with easing geopolitical tensions, it has reignited investor appetite for risk assets.”
Government Shutdown Enters Fourth Week, Market Impact Remains Limited
Political gridlock in Washington continues as the US government shutdown enters its fourth week. The partial closure has delayed key economic data releases, including employment and inflation reports. The Bureau of Labor Statistics (BLS) announced that the delayed September CPI report will be released this Friday.
Bloomberg Economics estimated that around 640,000 federal employees have been furloughed, potentially pushing the unemployment rate to 4.7%. Still, markets view the short-term economic impact as limited, reinforcing speculation that the Federal Reserve may cut interest rates by 25 basis points at its October 28–29 FOMC meeting.
Bond Yields Fall as Inflation Expectations Ease
The US 10-year Treasury yield slipped to 3.984% as long-term inflation expectations (breakeven rate) declined to 2.26%, the lowest level in four months. The move supported growth-heavy sectors, particularly technology.
European bond markets also strengthened. German Bund yields fell to 2.58%, while UK Gilts eased to 4.50%. Meanwhile, S&P Global Ratings downgraded France’s credit rating to A+ from AA-, citing fiscal uncertainty.
Technology and AI Stocks Lead Wall Street’s Rally
Mega-cap tech stocks were the main drivers of the rally. Apple gained over 3%, followed by Meta Platforms (+2%), while Alphabet, Amazon, and Tesla each rose more than 1%. Semiconductor and artificial intelligence (AI) infrastructure sectors also posted strong gains.
Investor Focus Shifts to Earnings Season
More than 30 major corporations, including 3M, Coca-Cola, GE, and Netflix, are set to report earnings this week. So far, 85% of S&P 500 companies have beaten analyst expectations, even though aggregate earnings growth is expected to rise only 7.2% year-on-year — the slowest pace in two years.
Outlook: Optimism Holds, Risks Linger
Markets enter a crucial week buoyed by renewed optimism from China’s recovery, lower bond yields, and strong corporate results. However, risks from the ongoing US government shutdown and global fiscal uncertainty persist.
“Investors are caught between two forces — the euphoria of global recovery and the shadow of domestic political risk,” said a senior analyst in New York. “But as long as earnings momentum remains strong, the market seems poised to stay optimistic.”