US stocks experienced a positive uptick on Wednesday, fueled by anticipations of interest-rate cuts, as several Wall Street banks reported strong earnings that set an optimistic tone for the beginning of the earnings season. The Dow Jones Industrial Average (^DJI) saw an increase of about 0.2%, recovering from a volatile trading session the previous day. The S&P 500 (^GSPC) and the Nasdaq Composite (^IXIC) performed even better, gaining approximately 0.5% and 0.7%, respectively.
The encouraging earnings reports came amidst persistent tensions between the US and China, as well as an ongoing government shutdown with no resolution in sight. Bank of America (BAC) announced a profit surge of 23%, benefiting significantly from a wave of sizable deals this summer in the financial sector. Morgan Stanley (MS) echoed this success, reporting a remarkable 45% increase in profits, which CEO James Gorman described as an “outstanding” quarter.
Jerome Powell, the Federal Reserve Chair, further bolstered market sentiment with comments indicating a rise in “downside risks to employment,” suggesting that interest rate cuts may indeed be on the horizon. Investors are increasingly confident about a rate cut in the upcoming month, with the likelihood of another in December now estimated at around 96%. Additionally, the release of the Fed’s Beige Book, which summarizes economic conditions, is anticipated to attract considerable attention later in the day.
Despite optimistic sentiments in the US, US-China trade tensions simmered as President Trump threatened to implement an embargo on cooking oil imports from China, retaliating against China’s reduction in soybean purchases from the US. This encounter escalated following China’s sanctions against several US subsidiaries of South Korean shipbuilder Hanwha. However, Treasury Secretary Scott Bessent indicated that Trump still plans to meet with Chinese leader Xi Jinping later this month, sparking some renewed hopes of resolution.
In parallel, domestic issues loomed larger as the Trump administration braced for a prolonged government shutdown. A list detailing potential cuts to federal programs is expected to surface this week, alongside efforts from the White House budget office to ensure military and law enforcement personnel can still be compensated.
Interestingly, some Australian stocks are reaping benefits from the ongoing US-China trade conflict. Australian Oilseeds (COOT) saw its stock surge approximately 260% to $3.48 following Trump’s threats against Chinese producers. Moreover, Australian mining firms involved in critical mineral projects, such as Nova Minerals and Resolution Minerals Ltd., also experienced significant gains as the US seeks to diversify its supply chain away from China.
In the tech sector, Apple (AAPL) shares climbed by 1.4% after launching new products, including an upgraded M5 chip, 14-inch MacBook Pro, and iPad Pro. Meanwhile, Nvidia’s (NVDA) stock rose 2% on news of an upgrade from HSBC, which anticipates continued earnings growth for the chip manufacturer due to expanding market opportunities in artificial intelligence.
Gold prices continued to soar, reaching record highs with futures trading up 1% to over $4,211 per ounce. Spot prices hovered around $4,163, indicating a growing trend among investors favoring hard assets. The surge in precious metals has led some market analysts to caution that gold may be overvalued, while others suggest significant room for further growth, projecting potential prices as high as $6,000 per ounce should just a fraction of US assets held by foreign investors shift toward gold.
On the earnings front, Dollar Tree (DLTR) shares spiked 8% after projecting a robust earnings growth of up to 10% annually over the next three years despite facing challenges from tariffs. Additionally, market watchers took note of the possible implications of an AI-driven boom, with heightened caution expressed over the sustainability of such growth, as signs of a potential ‘bubble’ come into focus.
Overall, the robust performance of the stock market amidst strong earnings, coupled with Federal Reserve expectations and strategic developments in trade relations, painted a complex yet optimistic picture for investors navigating current economic landscapes.
