China-U.S. trade negotiations and Fed rate cut expectations provide a double boost: the Nasdaq continues its winning streak, while the crypto market experiences an overall pullback.

The China-U.S. economic and trade talks were held in Madrid, Spain, where both sides had candid, in-depth, and constructive communication on economic and trade issues such as TikTok, and reached a basic framework consensus. At the same time, market expectations for a rate cut by the Fed continue to heat up, with a cut of at least 25 basis points almost a certainty.

These two positive factors jointly drove U.S. stock futures up during the morning trading on September 16, with the Nasdaq 100 index expected to extend its winning streak to 10 trading days.

01 China-US Economic and Trade Talks: Framework Consensus Reached, Trade Tensions Eased

The Chinese and American sides held a two-day economic and trade dialogue in Madrid, Spain. Li Chenggang, the international trade negotiation representative and deputy minister of the Ministry of Commerce of China, stated that both sides are actively implementing the important consensus reached during the call between the heads of state of China and the United States. Based on mutual respect and equal consultation, they engaged in candid, in-depth, and constructive communication on economic and trade issues of mutual concern, including TikTok.

Regarding the TikTok issue, China has clearly stated its consistent opposition to politicizing, weaponizing, and instrumentalizing technology and economic trade issues, and will never seek to reach any agreement at the expense of principles, corporate interests, and international fairness and justice.

The two sides reached a basic framework consensus on properly resolving TikTok-related issues through cooperation, reducing investment barriers, and promoting relevant economic and trade cooperation. U.S. Treasury Secretary Scott Basset described the talks as "mutually respectful, broad, and in-depth."

Despite not reaching a final trade agreement, both sides agreed to hold trade negotiations again in about a month. Beisente and U.S. Trade Representative Jamison Greer hinted that the tariff truce might be extended before the November deadline.

02 Fed Policy: Expectations for Interest Rate Cuts Rise, Market Welcomes Good News

Market expectations for a Fed rate cut continue to heat up. Investors expect that a reduction of at least 25 basis points is almost a certainty, and there may even be a small probability of a significant cut of 50 basis points.

According to market forecasts, there will be a total decrease of 67 basis points by the end of this year, and it will further reach 81 basis points by the end of January next year. This expectation mainly stems from the recent rapid softening of labor market data, which has become a key driving factor for the enhancement of easing expectations.

Pepperstone's research director, Chris Weston, stated: "An increasing number of perspectives believe that the Fed is behind the curve and needs to accelerate the urgency to bring interest rates to a neutral level. Capital weight is getting closer to the consensus position, which is that the Fed will not only cut rates at the September meeting but also in October, December, and possibly even January."

U.S. President Trump also posted on social media, calling for Fed Chair Powell to implement "larger" benchmark rate cuts, and pointed out the issues in the housing market.

03 Market Reaction: US stock futures rise, Nasdaq performs strongly

U.S. stock futures rose in early trading on September 16, continuing the historic highs set overnight by the Nasdaq Composite and the S&P 500. The Nasdaq 100 E-mini rose by 249 points, the S&P 500 E-mini increased by 57 points, and the Dow Jones E-mini climbed by 315 points.

The Nasdaq 100 Index is expected to extend its winning streak to 10 trading days, possibly surpassing the 9-day consecutive rise record set in November 2023. The longest winning streak of 19 days for this index dates back to May 1990.

Analyst Adam Korbesi emphasized the positive impact of interest rate cuts on the stock market: "The Fed is about to add rocket fuel to the fire: since 1980, whenever the Fed has cut interest rates with the S&P 500 at historical highs, it has resulted in higher historical highs 100% of the time after 12 months. Not to mention that this time we are in the midst of an AI revolution, and this is only the second game."

Interest rate-sensitive stocks, including the "Magnificent Seven" companies, will benefit from the Fed's more dovish policy stance. Kobesi pointed out: "Just the capital expenditures of the Magnificent Seven companies exceed $100 billion each quarter."

04 Cryptocurrency Market: Overall Correction, GameFi Sector Leads Decline

Unlike the strong performance of traditional stock markets, the cryptocurrency market has recently shown signs of a pullback. According to SoSoValue data, various segments of the crypto market have pulled back for two consecutive days.

The GameFi sector has once again led the decline by 4.41% in the last 24 hours, with ImmutableX (IMX), GALA, and Four (FORM) down by 3.64%, 5.46%, and 6.12%, respectively.

Bitcoin (BTC) fell by 0.07%, fluctuating narrowly around $115,000. Ethereum (ETH) dropped by 1.93%, maintaining around $4,500.

In other sectors, the CeFi sector fell by 0.98% in 24 hours, the PayFi sector fell by 1.71%, the Layer1 sector fell by 1.99%, the DeFi sector fell by 2.47%, the Layer2 sector fell by 3.51%, and the Meme sector fell by 3.77%.

05 Technical Analysis: Key Levels Determine Market Direction

Tuesday's morning rally has a short-term bullish bias, but the momentum depends on the FOMC's interest rate decision, forecasts, and Fed Chairman Powell's press conference.

Dow Jones Index：

Resistance level: historical high point of 46,270 on September 16, followed by 46,500.

Support levels: 46,000, 45,500, and then the 50-day moving average (44,922).

The daily chart has issued a bullish price signal.

Nasdaq 100 Index:

Resistance levels: historical high of 24,563 on September 16 and 25,000.

Support levels: 24,500, 24,000, and the 50-day exponential moving average (23,378).

The daily chart has issued a bullish price signal.

S&P 500 Index:

Resistance levels: September 16 historical high of 6,679, 6,750, followed by 7,000.

Support levels: 6,500 and the 50-day exponential moving average (6,405).

The daily chart has issued a bullish price signal.

06 Risk Factors: Retail Data and Inflation Pressure

Despite the overall optimism in the market, downside risks still exist, especially considering that inflationary pressures remain high. Traders should prepare for the U.S. retail sales data, which will provide insights into the U.S. economy.

Economists predict a month-on-month growth of 0.3% in August, following a growth of 0.5% in July. A higher reading may alleviate recession fears, as private consumption accounts for about 67% of the US GDP.

Positive data may boost risk appetite as the Fed focuses more on cooling the labor market in terms of monetary policy. On the other hand, lower readings may trigger recession fears, which could test risk appetite.

However, given that the Fed is closely monitoring the labor market, today's data is unlikely to change policy unless there is a sharp decline.

07 Market Outlook: Trade and Fed Policy Become Key

Traders should closely monitor key events, including today's consumer spending report. However, Wednesday's Fed interest rate decision and forecast, along with Sino-U.S. trade negotiations, remain critical factors.

The de-escalation of the China-U.S. trade tensions and the reduction of tariffs may alleviate the risk of stagflation in the United States. U.S. tariffs have exacerbated inflationary pressures and suppressed consumer spending. Lowering tariffs on Chinese goods could suppress U.S. import costs, cool inflation, and potentially boost consumer spending.

The Fed's aggressive easing policies will lower borrowing costs, increasing yields and stock prices. Interest rate-sensitive stocks, including the "Magnificent Seven" companies, will benefit from the Fed's more dovish policy stance.

Conclusion

The positive progress of the China-U.S. trade negotiations and the dual benefits of the Fed's interest rate cut expectations have injected strong momentum into the U.S. stock market. The Nasdaq 100 index is expected to continue its winning streak and even set new records.

However, the market still faces challenges from inflationary pressures and global economic uncertainty. Traders should closely monitor the upcoming Fed interest rate decisions and forecasts, as well as further developments in Sino-US trade negotiations.

Against the backdrop of weak performance in the cryptocurrency market, the strong performance of traditional stock markets highlights investors' optimism about the improvement of China-U.S. trade relations and monetary policy easing. In the coming days, market direction will depend on the outcomes of these key events.