All three main U.S. equity indexes traded at all-time highs early in the final trading session of an eventful week, with markets tuned into talks between U.S. President Donald Trump and Chinese President Xi Jinping.
Momentum ebbed into the noon hour as participants continued to digest the Fed’s rate cut. But it was all “risk on” into the closing bell and the weekend as details of the Trump-Xi phone call emerged.
“I just completed a very productive call with President Xi of China,” President Trump wrote in a post on Truth Social. “We made progress on many very important issues including Trade, Fentanyl, the need to bring the War between Russia and Ukraine to an end, and the approval of the TikTok Deal.”
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Trump also said he and Xi agreed to meet at the APEC Summit in South Korea at the end of October, that he would go to China in early 2026, and that Xi would visit the U.S. at an appropriate time. “The call was a very good one,” Trump concluded.
The yield on the 2-year U.S. Treasury note ticked up to 3.572% from 3.568% as of Thursday’s closing bell. The 2-year yield – a basic barometer for Fed policy – has risen from 3.507% as of 2 pm Eastern Standard Time Wednesday, when the FOMC announced a 25-basis-point cut to the target range for the federal funds rate.
Price action suggests Treasury market participants hear a hawkish tone in the most recent Fed statement. Bond yields rise when prices fall and vice versa.
Investors are selling bonds after the FOMC and Fed Chair Jerome Powell indicated they’re still cautious about inflation. And, even as Powell described the move as a “risk-management cut” because of deterioration in the employment situation, markets are playing their own tune on interest rates.
Indeed, Minneapolis Fed President Neel Kashkari wrote in an essay published on the bank’s website that the labor market “appears to be weakening” and “nominal wage growth continues to moderate.” Kashkari observes as well that inflation remains high but inflation expectations haven’t risen as expected.
Still, Kashkari concludes, “I do not believe we should be on a preset course for a series of rate cuts.”
At Friday’s closing bell, the Dow Jones Industrial Average was up 0.4% at 46,328, the S&P 500 had gained 0.5% to 6,662, and the Nasdaq Composite had added 0.7% to 22,631 – once again, new record closing highs across the board.
The Russell 2000, however, traded down early and trended lower into the close after the index of small-cap stocks posted its first new all-time high since 2021 on Thursday. Small-caps are widely perceived to benefit more from lower interest rates than large-cap stocks.
OKLO and SMR go nuclear
Following President Trump’s state visit this week, the White House announced on Thursday that the U.S. and the U.K. will cooperate on a number of issues, including “securing a quantum advantage” and “accelerating AI innovation” as well as “unleashing civil nuclear energy.”
In a research note published Friday morning, William Blair analyst Jed Dorsheimer identified Oklo as a candidate for another deal similar to what privately held Kairos Power and its partner Google (GOOGL, +1.1%) agreed to in August with the Tennessee Valley Authority (TVA).
As Dorsheimer notes, the Kairos-Google-TVA deal “marks the first power purchase agreement (PPA) with a utility and a small modular reactor (SMR), a strong demand signal of utilities’ need for power and their risk appetite to engage with first-of-a-kind technologies.”
The analyst says the deal “read-throughs for other SMR developers like Oklo.” Dorsheimer rates OKLO stock Outperform, or Buy, but has not shared a 12-month target price.
Inflation, employment and sentiment
It’s a quiet week on the earnings calendar, but next week’s economic calendar includes an update on the Fed’s preferred inflation gauge, the Personal Consumption Expenditures Price Index (PCE).
And it also includes the first speech by recently confirmed Fed Governor Stephen Miran. Miran will sidestep the usual written statement outlining his dissent from the decision to cut interest rates by 25 basis points, as opposed to 50, at the September Fed meeting.
As Miran explained on CNBC, “People usually write these dissents that are like a page long. I’m going to walk through a lot of the economics and a lot of the arithmetic and the math and that’s going to take a full speech to do.” Miran will offer “a full accounting” at the Economic Club of New York on Monday.
Miran, on an unpaid leave of absence from his role as director of the Council of Economic Advisers while he serves the remainder of Adriana Kugler’s term on the Fed board, also told CNBC that tariffs aren’t fueling inflation and recent border policy changes will have a “very disinflationary effect.”
