Wall Street Waits on Fed's Wednesday Verdict

US stocks caught a bid Tuesday ahead of the FOMC’s 2-day meeting wrap-up on Wednesday. S&P 500 +0.23%, Nasdaq 100 +0.74%—traders betting hard on a dovish outcome.

Here’s what’s priced in: 100% odds the Fed cuts 25bp to 3.75%-4.00% this week, then another 25bp cut is 90% likely in December. By end of 2026, markets are discounting roughly 115bp in total cuts.

The real juice? Fed is expected to kill its quantitative tightening—meaning no more balance sheet drain. That’s bullish for both stocks and bonds.

Economic data came in hotter than expected: housing prices beat, Richmond Fed manufacturing improved, consumer confidence stayed resilient despite the headline miss. The 10-year yield dipped 6bp to 3.97%.

Plus, US-China trade talks hit a breakthrough over the weekend in Malaysia. The 100% tariff threat on Chinese imports is “effectively off the table,” per Treasury Secretary Bessent. China agreed to buy more US soybeans and hold off on rare earth export restrictions for at least a year. Deal gets official at Thursday’s Trump-Xi summit in South Korea.

Earnings season is firing: 173 S&P 500 companies reporting this week, including Alphabet, Meta, and Microsoft on Wednesday, Apple and Amazon Thursday. So far 84% of reporters have beaten forecasts—on track for the best Q3 earnings beat rate since 2021.

Watching: The government shutdown rolls into week 5, delaying key economic reports. Also, Supreme Court oral arguments on Trump’s reciprocal tariffs scheduled for November 5—lower courts already ruled them illegal.

Magnificent Seven mostly rallied: Nvidia up nearly 5% on new AI-quantum partnerships and revenue guidance. Microsoft +2% on its $135B stake in restructured OpenAI. Alphabet down 0.5%.