US investors are heading into a busy week feeling a little more confident. After a stretch of volatility, easing trade tensions and a solid finish to last week have lifted the mood.
Markets have opened higher on Monday morning, suggesting Wall Street is in a positive atmosphere.
The boost comes after reports that President Trump plans to ease tariffs on dozens of products that aren’t easily made in the US and may add hundreds more to the list. That move helped calm markets that have been on edge about trade.
“This watering down of tariff threats could be good for overall risk sentiment as we start a new week,” said Kathleen Brooks, research director at XTB. “It highlights the game between financial markets and the President: markets take what Trump says literally, risky assets swoon, the President backtracks and then stocks come back.”
Even with the back-and-forth headlines, the uptrend in stocks remains intact. The S&P 500 climbed 1.7% last week, closing higher on Friday and staying above its 50-day moving average. The volatility index, or VIX, has come down from its recent spike above 25, a sign that nerves are settling.
“There’s less complacency out there, but the rally is still on,” Brooks said, adding that last week’s selloff might have been a healthy pause for markets that had gotten a little too comfortable.
Inflation takes center stage
The main event this week will be Friday’s US inflation report, which is one of the few major data releases still happening as the federal government shutdown drags into a fourth week. Economists expect headline inflation to tick up to 3.1% in September, while core inflation likely held steady at the same level.
The numbers will feed directly into the Federal Reserve’s next policy decision on October 29, where another rate cut is widely expected.
“Receiving the September CPI will at least give policymakers something to chew on,” Deutsche Bank economists wrote. Analysts expect modest price increases driven by energy costs and tariffs, but note that cooling rent and services inflation could offset some of that pressure.
Michael Brown, senior research analyst at Pepperstone, doesn’t think the data will change much. “It’s very tough indeed to imagine the data materially altering the Fed policy outlook,” he said. “Cuts this month and in December are effectively locked in.”
Earnings season heats up
Alongside the inflation report, investors will have plenty of corporate news to digest. Nearly 90 S&P 500 companies are set to report this week, including big names like Tesla, Netflix and Intel. Brooks noted that banks may still be processing their earnings hangover, with investors taking more time to gauge the broader credit picture.
While there’s no single theme driving the market right now, last week’s winners Estee Lauder, On Semiconductor and Best Buy show that investors are still rewarding solid company performance even in a choppy environment.
For now, the easing in trade tensions, expectations of another Fed rate cut, and a lighter tone in markets suggest the path of least resistance for stocks is still higher, even if the ride gets a little bumpier along the way.