US equity markets hit fresh highs supported by Fed cuts and US-China progress

Market surge on Fed cut and US-China trade optimism

Fresh record highs for the three key United States (US) equity markets on Friday were supported by the Federal Reserve's (Fed) rate cut, expectations of further reductions, and signs of progress in US-China relations. For the week, the Nasdaq 100 gained 2.22%, the S&P 500 added 1.22%, and the Dow Jones climbed by 481 points (+1.05%).

The S&P 500 initially weakened on Friday as Chinese media reported restrictive trade measures after a call between President Trump and President Xi Jinping. However, equities rebounded after President Trump announced a meeting with Chinese President Xi at the upcoming Asia-Pacific Economic Cooperation (APEC) Summit in South Korea on 31 October, ahead of the new 10 November deadline for tariffs.

Oracle and Meta's potential AI cloud deal boosts the rally

The rally gained momentum on speculative reports that Oracle and Meta are considering a deal on artificial intelligence (AI) cloud computing valued at approximately $20 billion. The agreement would provide Meta with expanded access to Oracle's AI-optimised cloud infrastructure, including hardware for AI model training and inference.

This aligns with Meta's intention to invest in a massive data centre expansion to support its platforms like Facebook, Instagram, and LLaMA AI models. Shares of Oracle surged 4.1% to close at $308.66, adding to its 80%+ year-to-date gains.

The key event on this week’s economic calendar is the Fed's preferred measure of inflation, the core personal consumption expenditures (PCE) price index for August.

Core PCE inflation

Date: Friday, 26 September at 10.30pm AEST

For July, the headline PCE price index increased by 0.2% month-on-month (MoM), easing from 0.3% in June. This saw the annual rate of headline PCE inflation remain at 2.6% in July, in line with expectations.

The core PCE index, the Fed's preferred measure of inflation, rose by 0.3% MoM, the same as in June. This increased the annual rate of core PCE inflation to 2.9% from 2.8%, marking the highest in five months.

Last week the Fed cut rates by 25 basis points (bp) and signalled more cuts to come as it switches its focus to the rising risks of a recession from a cooling labour market ahead of inflation.

For August, the expectation is for the core PCE price index to rise by 0.2% MoM, which would keep the annual rate at 2.9%, above the 2.6% low it reached in April.

The US interest rate market starts the week pricing in a 91% chance of a 25 bp rate cut at the Fed’s meeting on 29 October and a cumulative 45 bp of Fed rate cuts between now and year-end.

Core PCE Price Index chart

Nasdaq 100 technical analysis

The rally in the Nasdaq 100 to new record highs confirmed that the Wave IV pullback from the mid-August high of 23,969 concluded in early September at the 22,977 low and that a Wave V within our preferred Elliott Wave framework is underway.

The close on Saturday morning, above weekly trend channel resistance near 24,200ish (weekly close), indicates room for the rally to extend towards 25,000ish, possibly to 26,000 if fear of missing out (FOMO) grips markets. Keep in mind, a Wave V high should then be followed by a corrective pullback.

The first indication that a Wave V high is in place would be if the Nasdaq were to see a sustained break below support at 24,000 – 23,950. If that was followed by a break of the next layer of support at 23,500ish, it would greatly increase the likelihood that a medium-term high has been struck and that a deeper retracement back towards support at 23,000 – 22,700 is underway.

Nasdaq 100 cash daily chart

S&P 500 technical analysis

The rally in the S&P 500 to new record highs and above weekly trend channel resistance at 6530ish confirmed that the Wave IV pullback from the mid-August high of 6481 concluded in early September at the 6260 low and that a Wave V is underway within our preferred Elliott Wave framework.

There is room for the Wave V rally to extend towards 6800ish and possibly higher if FOMO grips markets. Keep in mind, a Wave V high should then be followed by a corrective pullback.

The first indication that a Wave V high is in place would be if the S&P 500 were to see a sustained break below last week’s low of 6650ish. If followed by a break of the next layer of support at 6500 – 6480ish, it would greatly increase the likelihood that a medium-term high has been struck and that a deeper retracement back towards support at 6350 is underway.

S&P 500 cash daily chart

• _{Source: TradingView. The figures stated are as of 22 September 2025. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}