Stocks face a key hurdle in next week’s U.S.-China summit. Here’s what’s at stake
HS 18/09/2026
Investors have gotten past the latest Federal Reserve meeting relatively unscathed, but they are settling in for a higher-for-longer rate environment and anticipating market choppiness in the coming months. Next week’s U.S.-China summit could be a potential wildcard. Stocks capped off a mixed week Friday. The S & P 500 and Dow Jones Industrial Average each posted a losing week, after the Fed unanimously decided to raise rates for the first time since 2023. But the Nasdaq Composite notched a third winning week in four, as tech stocks led the rebound after the central bank meeting. Still, the resilience of the market this week has been astounding, given that the Fed has signaled it may not be done with raising rates. At Wednesday’s meeting, policymakers penciled in one more rate increase in 2026. But fed funds futures were last pricing in roughly 42% odds that there are actually two more coming, according to the CME FedWatch Tool . .SPX 5D mountain The S & P 500 in the past five trading days Conventional wisdom suggests that a tightening cycle is a headwind for stocks, as higher rates usually raise borrowing costs and can lower the value of future earnings. But investors seem to have taken the prospect of a “higher for longer” environment in stride, reassured by the strength of the economy and corporate earnings thanks to the outsized spending in artificial intelligence. “As long as the growth keeps up to more than offset the rate hikes, you can still see equities continue to rally,” said David Miller, chief investment officer at Catalyst Funds. But it’s also clear that the path forward just got a bit more challenging than it was before. Bond yields remain elevated. Oil prices remain above $100 a barrel as the war in the Middle East wears on. The U.S. will also grapple with what’s shaping up to be an eventful midterm election season. Downside risks Some are pointing out that weakening breadth and investor complacency implies further downside for stocks. BTIG’s Jonathan Krinsky noted this week that the percentage of S & P 500 stocks that remain above their 200-day moving averages was at 49%. “More and more stocks are breaking support and their 200 DMAs,” Krinsky wrote Wednesday. “Ultimately we need to see sentiment become less complacent, more oversold conditions, and a higher correlation index decline for us to think this correction has run its course.” Elsewhere, Ed Yardeni slashed his year-end S & P 500 target to 7,900 from 8,400. The new forecast suggests the S & P 500 can still climb to new highs this year, but it’s also far from the upside indicated in his prior estimate. “The risks of a downturn have increased over the next three to six months,” the president of Yardeni Research wrote. Next week, that heightens the stakes around the U.S.-China summit in Washington, DC. The meeting between U.S. President Donald Trump and China President Xi Jinping is expected to have few breakthroughs when it comes to tariffs or an increasingly important conversation around AI. But any sharp escalation in tensions that costs the U.S. a key intermediary in its war with Iran could exacerbate an energy crisis when the stakes are high for the White House, potentially triggering a market correction. Any cooperation between the two countries, however, could mean a sudden a rush of relief for investors. “I don’t have a crystal ball and have no idea what is happening inside the heads of the relevant leaders. I can only look at incentives… and the economic incentive to de-escalate and find a deal is enormous. This is arguably the moment of maximum leverage for both sides,” Goldman Sachs’ Rich Privorotsky wrote on Friday. “China matters because there is effectively no trust between the parties, and Beijing could potentially act as an intermediary if it gets enough in return,” added Privorotsky, the firm’s head of European One Delta trading. “Trump/Xi next week has the potential to be an important moment for the market.” Week ahead calendar All times ET. Monday, Sept. 21 Tuesday, Sept. 22 8:15 a.m. ADP Weekly Employment change (09/05) Earnings: Thor Industries, AutoZone, KB Home Wednesday, Sept. 23 9:45 a.m. S & P Global PMI Manufacturing preliminary (September) 9:45 a.m. S & P Global PMI Services preliminary (September) Earnings: Paychex , Cintas , General Mills Thursday, Sept. 24 *Trump-Xi Summit 8:30 a.m. Current Account (Q2) 8:30 a.m. Initial Claims (09/19) 10:00 a.m. New Homes Sales (August) 10:10 a.m. Philadelphia Reserve Bank President Anna Paulson speaks at the Tenth Annual Fintech Conference in Philadelphia, Pennsylvania Earnings: Costco Wholesale , Darden Restaurants Friday, Sept. 25 8:30 a.m. Durable Orders preliminary (August) 10:00 a.m. Michigan Sentiment final (September)
