Good morning,

Markets are trying to shake off Friday’s tariff hangover, and for now, the bulls are winning.

Futures are up after Trump hinted he’s open to a deal with China, following the White House’s threat of 100% tariffs on Chinese goods on Friday.

But nothing is settled yet, and this newfound “TACO” confidence is still paper-thin.

On the macro front, consumer sentiment slipped again in early October as more Americans worry about jobs and rising prices. 

We’ll see how that bears out in real life as soon as this week.

With government data frozen by the shutdown, investors are turning to the big banks for clues about the economy’s true health.

JPMorgan, Citi, Goldman, and Wells Fargo kick off earnings tomorrow. If results show steady loan growth, it might take some of the edge off after the worst market slide since April.

Meanwhile, the bull market just turned three years old. It’s been a $28 trillion run built on the backs of a handful of megacaps... and it might need more players to keep the charge alive.

Quote of the day 

Five things to know before opening bell

🌮 TACO Monday

Stocks are kicking off the week on a brighter note, with futures and oil up after Trump hinted he’s open to a deal with China. Crypto has also recouped some of Friday's losess, silver is at its highest in decades, and gold just notched a fresh record. Not a bad TACO Monday.

😬 Consumer mood down on job worries

The latest University of Michigan survey shows consumer sentiment slipped in early October to 55, its lowest reading since May. Americans aren’t feeling great about the job market, with nearly 3 in 5 expect unemployment to rise over the next year. On the flip side, inflation expectations nudged lower.

📊 CPI to roll out despite shutdown

The Bureau of Labor Statistics will go ahead with the September CPI report later this month, even as most agencies stay frozen by the DC gridlock. The release will give the Fed some much-needed direction heading into its next meeting. 

₿ Senate proposal shakes DeFi markets

Senate Democrats floated a proposal to tighten oversight of decentralized finance platforms. The bill would give the Treasury Department power to blacklist DeFi frontends it deems risky, which, critics say, could “effectively outlaw” digital asset trading in the US. It’s the latest twist in the ongoing tug-of-war between security and decentralization.

🌍 IMF meets in DC with bubble fears in the air

IMF head Kristalina Georgieva warned that stock valuations are starting to look like the dot-com era, fueled by AI hype and abundance liquidity. She cautioned that a bigger correction could “drag down world growth.” The IMF’s Global Financial Stability Report drops tomorrow and is expected to set the tone for a tense week.

🌮 Another TACO trade?

Risk assets fell off a cliff closed on Friday as Wall Street braced for fallout from the White House’s escalation. Here's a quick breakdown of what happened...

📊 Friday's scare by the numbers: 

• Trump threatened to cancel his upcoming meeting with China’s Xi Jinping

• Hours later, he announced plans for a 100% tariff on Chinese goods

• The proposal also adds new export controls on “critical software”

• It marked the worst single-day drop since April for the S&P 500, Nasdaq, and Russell 2000

• Gold extended its record-setting rally as investors rushed for cover

🇨🇳 Beijing pushes back

China wasted no time firing back. 

The Ministry of Commerce warned Washington to “stop threatening” higher tariffs and vowed to “resolutely take corresponding measures” if the US moves forward.

Officials defended their own trade measures, including new port fees on US vessels and tighter rare-earth export rules, calling them justified responses to US policy. 

They also downplayed fears of supply-chain disruption, although China’s dominance in rare earths remains a powerful bargaining chip if talks resume.

🕊️ Signs of a possible off-ramp

By Sunday, Trump’s team backed down. 

The administration said it’s open to a deal with China to cool tensions but warned that Beijing’s latest export restrictions remain a major obstacle. 

Vice President JD Vance urged China to “choose the path of reason,” insisting that Trump holds more leverage if the standoff drags on.

Trump later hinted at an off-ramp for Xi Jinping, paired, of course, with a reminder that a full trade war would hurt China more than the US.

💡 What it means for you

With inflation still running warm, Fed policy up in the air, and a government shutdown stretching into a second week, traders are desperate for any sign of a truce. 

For now, compromise looks more likely than confrontation, but that confidence could flip on a dime.

Friday’s sell-off was a reminder of how much is priced into this rally. The bull market now hangs on whether cooler heads on both sides of the Pacific prevail.

🏦 Bank earnings will step in for official data this week...

With government data still frozen by the shutdown, Wall Street is looking to the big banks for answers. 

The nation’s top lenders will report earnings this week, offering the clearest read yet on how resilient the economy really is as 2025 winds down.

📅 What to expect

The action starts tomorrow with JPMorgan, Citigroup, Goldman Sachs, and Wells Fargo reporting before midweek brings updates from Bank of America and Morgan Stanley.

The rhetoric from bank execs has stayed surprisingly positive lately. Goldman Sachs CEO David Solomon said he sees “an acceleration heading into 2026."

Bank of America CFO Alastair Borthwick called corporate credit “terrific” and pointed to “resilient” household balance sheets.

Not everyone’s buying into the full optimism, but even cautious analysts like Barclays’ Jason Goldberg say results “should continue to exceed expectations.”

Analysts expect profits across the top six banks to rise about 6% year-over-year thanks to steady loan demand, big-ticket deals, and a rebound in investment banking.

🗂️ Proxy for federal data

Meanwhile, economists will be watching closely for signals on business and consumer health, everything from credit-card payment trends to corporate lending. 

With official data in short supply, those figures carry extra weight. 

If lenders show strong credit health despite the gridlock and tariff drama, it might be just enough to keep the rally alive through another volatile stretch.

🚀 The bull market just turned 3

It’s a milestone few saw coming when the S&P bottomed in October 2022, but the rally quietly turned three yesterday. Over that stretch, the index has added 83%, or roughly $28 trillion in market value.

⚡ What sets this one apart

This isn’t your dad's bull run. Instead, the rally is perched on a handful of megacap tech stocks:

• Nvidia has skyrocketed 1,500% since the rally began

• Meta has climbed 450%

• Equal-weight S&P 500 performance lags market-weight by 21 percentage points

Bloomberg analysts note this is the largest gap between market- and equal-weight growth ever recorded at this stage of a bull market. 

Fidelity’s Jurrien Timmer calls it “remarkably top-heavy” and “unlike anything we’ve seen this early in the cycle.”

🛤 A narrow path forward

CFRA’s Sam Stovall points out that the S&P’s P/E ratio of 25 is the highest ever for a bull market this early, which suggests the market might need to take a breather soon.

History begs to disagree. Postwar bull markets have lasted 4.5 years on average, delivering 157% total returns. So can this rally reach its fourth birthday? 

Possibly, but only if more sectors join the party. Economist Jim Paulsen sees that happening, with a little help from the Fed. 

“Don’t fight the Fed or the tape,” he says, predicting equal-weight and small-cap stocks will eventually join a broader rally, “with a few bumps along the way after three years of outsized gains.”

After Friday’s close, they’ve all got some work to do.