Futures-options traders work on the floor at the New York Stock Exchange's NYSE American in New York City, U.S., October 22, 2025. REUTERS/Brendan McDermid

By Pranav Kashyap and Twesha Dikshit

(Reuters) -Wall Street's main indexes notched record highs on Monday as excitement around a potential U.S.-China trade deal set the tone for a week packed with Big Tech earnings and a widely expected interest rate cut.

Earnings from "Magnificent Seven" members Microsoft, Apple, Alphabet, Amazon, and Meta later this week will test the endurance of the AI rally. The five megacaps gained between 1% and 3%.

President Donald Trump and China's Xi Jinping will meet on Thursday to decide on a framework that could pause tougher U.S. tariffs and China's rare-earth export curbs, easing market jitters around a trade war and sending Wall Street's "fear gauge" VIX down to a one‑month low.

U.S.-listed shares of Chinese companies gained on Monday. Alibaba Group Holding, JD.com and PDD Holdings rose more than 2% each, while Baidu added 4.8%.

"Markets just want to be positive. Investors want a reason to buy and they see that reason in whether it's lower rates, trade deals, decent earnings or the continued dominance of the AI trade," said Melissa Brown, managing director of investment decision research at SimCorp.

At 11:21 a.m. ET, the Dow Jones Industrial Average rose 199.11 points, or 0.42%, to 47,406.23, the S&P 500 gained 60.43 points, or 0.89%, to 6,852.12 and the Nasdaq Composite gained 353.95 points, or 1.54%, to 23,560.95.

Qualcomm surged 15% after unveiling two artificial intelligence chips for data centers, with commercial availability from next year. AI chip leader Nvidia rose 2.7%.

Tech stocks added 1.4% and the Philadelphia SE Semiconductor index hit a fresh record high.

"To justify the valuations, we are going to have to see exceedingly good earnings. There's a lot of expectation that those earnings are going to be good," Brown said.

FED RATE CUT FULLY PRICED IN

Cooler inflation data last week all but sealed bets for a 25-basis-point rate reduction from the Federal Reserve on Wednesday, and investors will closely monitor Chair Jerome Powell's comments for clues on a December cut, as the government shutdown hinders key data releases.

The rate-sensitive Russell 2000 rose 0.3%, hovering close to record highs.

Among other stocks, Keurig Dr Pepper jumped 6.8% after lifting its annual sales forecast and raising about $7 billion to finance its purchase of Dutch coffee giant JDE Peet's.

Lululemon shares were up 3.1% after the company announced a partnership with NFL to launch an apparel collection.

U.S.-listed shares Of Argentine companies jumped after President Javier Milei's election victory.

YPF gained 30%, while Grupo Supervielle surged 50%, and Banco Macro and Grupo Financiero Galicia advanced 40% each while Banco BBVA Argentina rose 45%.

Janus Henderson jumped 13.5% after confirming an acquisition proposal from Trian and General Catalyst.

Advancing issues outnumbered decliners by a 1.49-to-1 ratio on the NYSE and by a 1.23-to-1 ratio on the Nasdaq.

The S&P 500 posted 28 new 52-week highs and three new lows while the Nasdaq Composite recorded 109 new highs and 34 new lows.

(Reporting by Pranav Kashyap and Twesha Dikshit in Bengaluru; Editing by Pooja Desai and Devika Syamnath)