Shares in Japan and South Korea rose, while Hong Kong is closed for a public holiday on Wednesday. The S&P 500 closed slightly up, while a gauge of the Magnificent Seven megacaps climbed 1.3%. A gauge of the dollar edged lower for a third day. Oil held a three-day drop amid mounting signs of oversupply, while gold inched up after three days of losses.
The yen gained after US Treasury Secretary said the Japanese government’s “willingness to allow the Bank of Japan policy space will be key.”
While most shares in the S&P 500 took a breather after a torrid run, tech megacaps kept rising, with Nvidia Corp. adding almost 5% after Chief Executive Officer Jensen Huang announced a flurry of new partnerships and dismissed concerns about an AI bubble. Nvidia supplier SK Hynix Inc. jumped as much as 4% after reporting a record profit.
With five big tech companies — representing roughly a quarter of the US equity benchmark — set to report between Wednesday and Thursday, investors will soon gauge whether the billions poured into computing infrastructure will keep flowing and ultimately deliver returns. Adding to the week’s momentum, Fed officials are poised to announce their rate decision on Wednesday, with Wall Street largely betting on a quarter-point cut.
“The markets have a massive wall of event risk to scale this week,” wrote Kyle Rodda, a senior analyst at Capital.com in Melbourne.That’s all happening ahead of President Donald Trump’s Thursday meeting with his Chinese counterpart Xi Jinping. The Wall Street Journal reported the US would roll back some tariffs if Beijing cracks down on the export of chemicals that produce fentanyl. Optimism around a deal has boosted copper to near record levels, and seen gold pull back from recent highs.
The Trump administration is also slated to sign a deal with South Korea aimed at bolstering cooperation in artificial intelligence, quantum computing and 6G, according to a US official — part of a bid to maintain a competitive edge with China in an expanding race for tech supremacy.
Technology sector remains the key focus of market participants. The so-called ‘Magnificent Seven’ group is projected to deliver profit growth of 14% in the third quarter, according to data compiled by Bloomberg Intelligence.
That’s nearly twice the 8% expected profit growth for the broader S&P 500, but it also would be the slowest pace since the first quarter of 2023.
However, big techs have a history of reporting earnings that far exceed Wall Street estimates. And that’s what many investors are counting on.
“We expect another strong round of megacap tech earnings reports, given the relentless demand for AI technology and infrastructure,” said Clark Bellin at Bellwether Wealth. “While profitability in AI remains an unknown, investors for now are willing to overlook this as the AI arms race heats up.”
Also buoying sentiment were bets the Fed will cut rates Wednesday, with traders hoping for clarity as to when officials will stop shrinking the central bank’s portfolio of securities. Bets have grown they may end quantitative tightening as soon as this month.
Expectations are set for two things from this week’s Fed meeting — officials will lower rates by a quarter percentage point and Chair Jerome Powell will offer little guidance as a growing divide among policymakers blurs the path ahead.
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