Cautious Trading Amid Fed Signals, Earnings Optimism, and Geopolitical Easing

Index Update: Investors prepared for the upcoming Q3 earnings season, with major banks set to report next week. In premarket trading, PepsiCo rose 0.2% on strong results, Delta Air Lines surged over 5% on positive 2025 forecasts, and AMD and Nvidia gained after AI-related developments and U.S. export approvals. Despite the ongoing government shutdown delaying economic data, markets remained confident of two additional Fed rate cuts this year amid signs of slowing employment and lingering inflation concerns.

Market Movers: On Wednesday, the top gainers were Xenetic Biosciences, Inc. (+141.49%), followed by AlphaTON Capital Corp. (+95.52%). On the contrary Galecto, Inc. (-40.57%), and C3is Inc.(-36.61%) declined the most the same day.

Commodities Update: Crude oil prices remained steady on Thursday, with WTI trading above $62 and Brent above $66 per barrel, as easing Middle East tensions followed news of a potential Israel-Hamas peace deal mediated by the U.S. and Qatar. Despite a second weekly rise in U.S. crude inventories, stockpiles stayed near seasonal lows, while demand climbed to its highest level since December 2022.  Gold held near record highs around $4,040 per ounce, supported by economic uncertainty and expectations of Fed rate cuts amid weakening labor market signals. However, reduced geopolitical risk and the ongoing U.S. government shutdown tempered safe-haven demand and heightened overall market caution.

Macro Updates: The U.S. dollar index rose to around 99, reaching two-month highs amid broad currency weakness. The dollar gained over 3% against the yen after Japan’s leadership change signaled continued loose monetary policy and higher fiscal spending, and nearly 1% versus the euro following the French Prime Minister’s resignation. Investors also weighed the economic impact of the ongoing U.S. government shutdown, while awaiting remarks from Fed Chair Jerome Powell after FOMC minutes revealed mixed views on future rate decisions.

Bonds Commentary: The 10-year U.S. Treasury yield fell to around 4.11%, marking its third consecutive decline as investors awaited further guidance from the Federal Reserve. Minutes from the September meeting revealed a divided outlook, with officials citing labor market risks that support rate cuts but lingering inflation concerns. Traders expect quarter-point cuts in October and December, while the ongoing government shutdown continues to delay key economic data, adding uncertainty for policymakers and investors.

Futures Update: U.S. stock futures were flat on Thursday as investors awaited comments from Federal Reserve Chair Jerome Powell and other officials, along with insights from the latest Fed meeting minutes. Markets continued to ride AI-driven optimism, which has fueled record highs for the S&P 500 and Nasdaq. However, concerns linger over stalled government operations amid a week-long shutdown that may delay economic data releases. With limited fresh economic indicators, traders are expected to remain cautious ahead of the third-quarter earnings season beginning next week.

Following the pullback observed in the previous session, stocks regained upward momentum during trading on Wednesday. The S&P 500 rose by 39.13 points, or 0.58%, closing at 6,714.58. From a technical perspective, the index stayed above important support levels and maintained its upward trend, suggesting further gains may be on the horizon. Additionally, the 14-day Relative Strength Index (RSI) is trending upward, reinforcing a bullish outlook. Key support levels are around 6,695, with resistance expected near 6,810.