Trump, Xi Talk Trade with Chips, TikTok in Focus

Published as of: September 19, 2025, 9:10 a.m. ET

(Friday market open) Another record-breaking week wraps up today with major indexes flat-lining and investors focused on U.S. trade with China. President Trump and Chinese leader Xi are talking this morning, potentially discussing issues like chip sales and the status of social media platform TikTok. In other overseas news, the Bank of Japan (BOJ) kept rates unchanged as expected, but also announced plans to sell assets accumulated over years of loose monetary policy. Japanese stocks fell, and the move appeared to have a slightly bearish global impact.

Today is quarterly "triple witching" as contracts for stock index futures, stock index options, and stock options all expire. This could lead to greater activity and increased volatility, but overnight trading was quiet. Also, Federal Reserve speakers returned to the circuit late this week, with Minneapolis Fed President Neel Kashkari saying he sees two more rate cuts this year. He cited the hiring slowdown, Bloomberg reported.

Thursday saw major indexes climb across the spectrum as the S&P 500 index and the Nasdaq Composite set record highs after the Fed's rate cut. In addition, the small-cap Russell 2000^® (RUT) posted its first record high close since late 2021, helped by thoughts that lower rates could propel smaller companies. The new peaks came even as the percentage of S&P 500 stocks trading at or above their 50-day moving average remained near 55%, well below summer highs near 80% and another sign that fewer names have rallied while many tread water.

1. Fed and market duel over rate path: The Fed is more conservative than the market with its projections for a target rate of 3.4% by the end of 2026. Futures trading pegs rates between 2.75% and 3.25% by then, per the CME FedWatch Tool. The question is, which side flinches first? Early moves in the Treasury market suggest it's investors, not the Fed. The Fed doesn't expect inflation to reach its 2% goal until 2028, likely accounting for its hesitation to commit to more cuts after the current ones it projects. "The Fed funds futures market is still pricing in a year-end 2026 rate of less than 3%, which we think might be too low given sticky inflation," said Collin Martin, director, fixed income strategy at the Schwab Center for Financial Research. Treasury yields ticked up after Wednesday's rate cut, suggesting investors may be ready to pull back the punch bowl a bit. Also, the Treasury yield curve steepened Thursday, a sign that the Fed's projections for more cuts could keep shorter-term yields under pressure even as fiscal worries and relatively strong economic growth prop long-term yields. That's not necessarily good news for those hoping lower rates would help housing.
    
2. Breaking down the rally: Though record highs for small caps yesterday suggest better breadth beyond mega caps, the rally continues to be dominated by the largest stocks. Over the last month going into Thursday, the Magnificent Seven collectively were up 10.5%, the S&P 500 index was up 3.7%, and the S&P 500 Equal-Weight Index (SPXEW) that weighs all 500 members equally rather than by market capitalization was up 0.7%. Drilling down further, it gets a little more complex and pokes holes in the common theory that most of this year's rally is technology based. As of earlier this week, 13 of the best 25 performers within the S&P 500 were in the technology sector, but only two of the best 25 performers within the Nasdaq were in the technology sector. The sectors most represented by the best 25 performers within the Nasdaq are actually consumer discretionary (eight stocks) and health care (five stocks), according to Schwab Chief Investment Strategist Liz Ann Sonders and Senior Investment Strategist Kevin Gordon.
    
3. Cooperation boosts chip stocks: Intel (INTC) soared more than 22% yesterday and Nvidia (NVDA) climbed more than 3.5% after Nvidia's investment of $5 billion in Intel stock. The two companies also announced a collaboration to jointly develop multiple generations of custom data center and PC products. The focus will be on connecting Nvidia and Intel architectures, but the deal doesn't include plans for Nvidia to use Intel's foundry business to make chips, at least for now, Barron's reported. Instead, Nvidia will continue to rely on Taiwan Semiconductor Manufacturing (TSM) for that. Other big tech stocks followed Nvidia and Intel higher Thursday. Advancing names Thursday included Palantir (PLTR), AppLovin (APP), TSM, ASML (ASML), and Marvell (MRVL). The chip sector sizzled on the Nvidia-Intel news but shares of Nvidia competitor Advanced Micro Devices (AMD) fell almost 1%, hurt by worries the Nvidia-Intel collaboration might pose a competitive threat. Arm Holdings (ARM), which could see recent market share gains threatened by the deal, also fell.

• Tesla (TSLA) fell 2% yesterday in what may have been a sell the news rally after shares climbed sharply the last two weeks heading into the Fed meeting and subsequent rate cut. News that Tesla would have to redesign door handles that drew safety scrutiny might also have weighed.
   
• Apple (AAPL) inched up 1.2% in early trading, supported by news that the iPhone 17 has gone on sale internationally today. Early demand in Asia for the new phone is strong, Bloomberg reported.
   
• Lennar (LEN) fell nearly 3% after the open. The home builder reported quarterly revenue that missed analysts' average expectation. Gross margin also fell short, and Lennar continues to use buyer incentives to keep homes selling, Barron's reported. Home building competitors D.R. Horton (DHI) and KB Home (KBH) both fell in sympathy with Lennar. KB Home reports next week.
   
• FedEx (FDX) rose 2.5% after earnings surpassed estimates. Revenue guidance for fiscal 2026 topped consensus expectations. FedEx is often seen as a solid barometer of business and consumer demand.
   
• Micron (MU) fell 3.5% in early trading today after setting a new record high yesterday. It's up 12 straight sessions, Barron's noted, so today's drop could represent profit taking ahead of its earnings next Tuesday.
   
• Yesterday's July Treasury International Capital report showed that foreign investors continue to invest in the U.S. "Net foreign long-term security inflows of $49.2 billion were down from the previous two months, but net flows have been positive for three straight months," said Kathy Jones, chief fixed income strategist at Schwab.
   
• The 10-year Treasury note yield climbed two basis points this morning to nearly 4.13% after initially dipping below 4% immediately after the rate cut. "Long-term Treasury yields are up since the Fed cut rates—not a good signal," Schwab's Jones said.
   
• Bitcoin (/BTC) fell 1.2% this morning and hasn't found much traction since the Fed's rate cut, though it did climb heading into the Fed meeting.

Experts assess Fed meeting: Learn more takeaways from the Fed's rate meeting, the impact of tariffs on inflation and jobs, and what to watch next week in the latest OnInvesting podcast featuring my colleagues Liz Ann Sonders and Kathy Jones. They look at the implications of the lower rates, the dynamics of the Fed's economic projections, and the state of the labor market. 

The Russell 2000 Index of small caps (RUT—candlesticks) closed at an all-time record high above 2,460 yesterday, the first time in nearly four years it's made an all-time closing high (though it did move above that level intraday last November). This four-year chart shows how far behind small caps have been behind the gains of the S&P 500 index (purple line) and tech-heavy Nasdaq-100^® index (blue line) over that time period. The dominance of big tech—not represented in the small-cap index—is a major part of the difference.

Check out the investors' calendar for a summary of the top economic events and earnings reports on tap this week.

September 22: No major earnings or data expected. 
September 23: August existing home sales and expected earnings from Micron (MU) and AutoZone (AZO).
September 24: August new home sales and expected earnings from KB Home (KBH) and Worthington Steel (WS).
September 25: August durable orders, second quarter GDP—third estimate, and expected earnings from Accenture (ACN), CarMax (KMX), and Costco (COST).
September 26: August PCE prices, personal spending, personal income, University of Michigan final September consumer sentiment.