Stocks Surge as Trade Tensions Ease and Q3 Earnings Impress

October 20, 2025

S&P 500 and Stock Market Update

The S&P 500 Index, along with the Dow Jones Industrial Average, saw gains on Monday, with the Dow rising by 1.07% and the Nasdaq 100 increasing by 1.30%. E-mini S&P futures were up by 1.12%, while E-mini Nasdaq futures climbed 1.32%.

Stock index futures experienced a bounce-back, continuing the upward trend from last Friday. The S&P 500 and Nasdaq reached one-week highs, and the Dow reached its highest point in a week and a half. Market sentiment shifted positively as President Trump expressed confidence about U.S.-China relations, declaring, “I think we’ll be fine with China.” There’s also optimism that third-quarter results will exceed expectations. European and Japanese stocks reached record highs, further boosting U.S. market feelings. Additionally, lower bond yields contributed to stock support, with the 10-year T-note yield decreasing by 3 basis points to 3.98% on Monday.

Treasury Secretary Bessent noted that the U.S. and China will discuss trade in Malaysia this week, gearing up for talks between President Trump and Chinese President Xi Jinping during the Asia-Pacific Economic Cooperation meeting in South Korea later this month.

Better-than-expected economic data from China is heightening global growth hopes. China’s third-quarter GDP grew by 1.1% quarter-on-quarter and 4.8% year-on-year, surpassing forecasts. Industrial production jumped 6.5% year-over-year in September, outpacing expectations, while the unemployment rate dipped slightly to 5.2% from 5.3% in September.

The ongoing U.S. government shutdown is now in its fourth week, creating a drag on market sentiment and delaying key economic reports. The shutdown has postponed the release of crucial data, such as weekly jobless claims and the September payroll report. The Bureau of Labor Statistics has stated that the September Consumer Price Report, initially set for release last Wednesday, will now be available this Friday. Concerns have been raised about potential layoffs in government roles that don’t align with President Trump’s priorities. Bloomberg Economics estimates a furlough of around 640,000 federal workers, which may increase unemployment claims and push the unemployment rate to 4.7%.

The combination of U.S.-China trade tensions, the government shutdown, and concerns about U.S. credit quality has driven some investors toward precious metals, with gold and silver reaching new highs last Friday.

As the third-quarter earnings season progresses, focus shifts to corporate earnings. Rising expectations for these profits are supporting a bullish stock market. According to Bloomberg Intelligence, approximately 85% of S&P 500 companies that have reported thus far have exceeded expectations. Moreover, more than 22% of S&P 500 companies offering third-quarter guidance are anticipated to surpass analyst predictions, marking the highest level in a year. Despite this, expectations for third-quarter profits show a modest increase of 7.2% year-over-year, the smallest in two years, with sales anticipated to grow at 5.9%, compared to 6.4% in the previous quarter.

The market is currently pricing in a 99% likelihood of a 25 basis point rate cut at the next Federal Open Market Committee meeting scheduled for October 28-29.

Overseas markets are experiencing upward movement. The Euro Stoxx 50 reached an all-time high with a 1.31% increase, while China’s Shanghai Composite rose by 0.63%. Japan’s Nikkei Stock Average achieved a new peak, soaring by 3.37%.

The December 10-year Treasury note closed higher, gaining 4 ticks. The yield fell by 2.5 basis points to 3.984% as inflation expectations moderated, following a decrease in the 10-year breakeven inflation rate. The ongoing government shutdown might lead to more job losses and reduced consumer spending, which could stress the U.S. economy and support continued interest rate cuts by the Fed.

Monday’s stock market rally took some steam out of safe-haven bond purchases, which in turn limited T-note price increases. The easing of U.S.-China trade tensions also contributed to reduced demand for government bonds.

European bond yields slipped on Monday, with Germany’s 10-year federal bond yield decreasing by 0.3 basis points to 2.577%, and the UK’s 10-year bond yield down by 2.6 basis points at 4.505%.

Germany reported a September Producer Price Index that fell by 0.1% month-over-month and by 1.7% year-over-year, below expectations of a slight increase.

Late last Friday, S&P Global Ratings downgraded France’s sovereign debt rating from AA- to A+, citing increased budget uncertainties, despite the announcement of the 2025 budget.

There’s a 2% chance reflected in swaps of the European Central Bank cutting interest rates by 25 basis points at its upcoming meeting on October 30.

Most tech stocks in the “Magnificent Seven” experienced gains on Monday, with Apple rising over 3% and Meta Platforms up more than 2%. Alphabet, Amazon, and Tesla also closed positively, each gaining over 1%. Microsoft ended the day up 0.63%.

Chipmakers and stocks connected with AI saw a rally on Monday, contributing to the overall market uplift. Companies like Super Micro Computers saw increases of over 5%, while ON Semiconductor and KLA Corporation also gained more than 4%. Advanced Micro Devices, Arm Holdings, and Microchip Technology all closed with gains exceeding 3%. Other players such as NXP Semiconductors, Micron Technology, Lam Research, GlobalFoundries, and Intel climbed by over 2%.

Stocks related to cryptocurrency also rose as Bitcoin saw a price uptick of more than 3%, having hit a 3.75-month low last Friday. Consequently, stocks such as Coinbase, Galaxy Digital, MARA Holdings, Riot Platforms, and Strategy increased, each gaining over 2%.

Celcuity Inc. surged by over 35% following reports of significant improvements in a clinical trial for its drug in breast cancer treatment. Cleveland-Cliffs saw a rise of 21% after reporting a smaller than expected adjusted loss per share of 45 cents. They recently secured an agreement with a major global steel producer. Sable Offshore Corporation increased by over 6% after backing from the U.S. Energy Secretary regarding its California oil project.

The Cooper Company rose by more than 4%, following reports that Jana Partners is looking to acquire a stake and consider strategic options. nCino also saw gains of over 4% after an upgrade from Raymond James. Lululemon closed over 2% higher after being upgraded from Underperform to Neutral. Hologic gained more than 2% amid news of potential acquisition talks by Blackstone and TPG.

On the flip side, Appravin led the decline in the S&P 500 and Nasdaq, dropping over 5% after reports of inquiries into the company by state regulators. Progressive Corporation fell by more than 2% following Morgan Stanley’s downgrade, while Marvel Technology and Astera Labs also experienced losses after receiving downgrades from Barclays, each down by over 2%.