New Week, New Risks: Fed Policy, AI’s Next Act and Trump-Xi in Focus

New Week, New Risks: Fed Policy, AI’s Next Act and Trump-Xi in Focus

US stock investors will focus the week on the path of interest rates, escalating tensions in the Middle East, and renewed calls to slow AI development as they assess whether major equity indexes can reach new record highs.

Markets will continue to absorb the Federal Reserve’s decision to raise interest rates on Wednesday for the first time in three years, as policymakers work to curb inflation. While the move was widely expected, investors remain uncertain about how many more rate hikes could follow and how they might affect already-rising Treasury yields.

Last Week Market Recap:

Two of the three major U.S. stock indexes closed lower last week. The Dow fell 1.7% over the five-day period, while the S&P 500 posted a slight decline. Technology stocks came under pressure after Anthropic CEO Dario Amodei urged the industry to slow the pace of AI development and focus more on safety. Even so, Nasdaq managed to finish slightly higher. Ongoing tensions in the Middle East also weighed on investor sentiment.

The Federal Reserve’s rate hike last week put months of speculation to rest. With that uncertainty largely behind them, investors may now refocus—at least partly—on everyday economic indicators such as food and fuel sales.

This Week’s Key Earnings and Economic Events:

Costco Wholesale’s quarterly results could offer fresh insight into the state of consumer spending. As gas prices surged, drivers turned to the warehouse club for its discounted fuel, leading to record fuel sales last quarter. Oil and gas prices are climbing again, though Costco has cautioned that higher fuel sales do not necessarily translate into increased spending in its stores.

Several major food and restaurant companies are also set to report earnings, including General Mills, Cracker Barrel, and Darden Restaurants, which owns Olive Garden and LongHorn Steakhouse. General Mills, the maker of Cheerios and Cocoa Puffs, warned earlier this year of “significant consumer stress” and lowered its outlook. Even so, some restaurant chains have recently benefited from offering more value-focused menu options.

Washington will remain in the spotlight this week, but attention is expected to shift from the Federal Reserve to the White House. President Donald Trump is scheduled to host Chinese President Xi Jinping for a summit on Thursday.

Key Market Catalysts to Watch This Week:

Key Economic Reports Poised to Influence Stock Market Direction

A light week on the economic calendar will provide an early look at the data expected next month. Preliminary S&P Global readings on U.S. manufacturing and services activity for September, due Wednesday, should show whether both sectors have maintained their recent strength. Thursday’s jobless-claims report will offer additional clues about the labor market, as continuing claims for the week ending Sept. 12 align with the timing of the household survey used to calculate the unemployment rate.

Also on Thursday, the government will release new home sales figures. Friday’s reports will include durable-goods orders, a gauge of business investment, and the University of Michigan’s consumer-sentiment index.

Meta’s Muse AI Steps Into the Spotlight

Meta Platforms is set to kick off its annual Connect developer conference on Wednesday. CEO Mark Zuckerberg is expected to unveil new app updates and hardware, while also highlighting early interest in Meta’s Muse AI agent. The app, designed to automate everyday tasks, has remained near the top of Apple’s free-app rankings since its launch earlier this month.

The company may also introduce new versions of its smart glasses, including models without cameras, according to reports. The company’s shares are up 2% this year and have been consolidating since August, but they have gained 17% over the past four weeks in September.

Investors Turn to Fed Speakers for Clues on Interest-Rate Direction

Investors are seeking clues about when the Federal Reserve might raise interest rates next. Fed funds futures late Thursday reflected nearly even odds of a hike at the central bank’s October meeting, which is scheduled shortly before the U.S. midterm elections.

Several Fed officials are due to speak next week following Wednesday’s policy meeting. Their remarks could provide valuable insight into the path of the rate-hike cycle, especially as Fed Chair Warsh has favored offering limited guidance on future policy decisions.

Trade and Technology Take Center Stage as U.S., China Prepare for Summit

U.S. President Donald Trump and Chinese President Xi Jinping are expected to meet in Washington on Sept. 24, with trade, tariffs, Taiwan, the Iran war, and artificial intelligence expected to top the agenda, according to Reuters. It will be the leaders’ second meeting this year.

Investors will be closely watching for signs that the current U.S.-China tariff truce could be extended beyond its Nov. 10 expiration. The agreement helped prevent further escalation after tariffs exceeded 100%, easing pressure on global supply chains. The two sides may also discuss agricultural trade, non-tariff barriers, and a proposed $30 billion reduction in mutual tariffs.

Trump is seeking increased Chinese purchases of U.S. goods, including agricultural products and Boeing aircraft. After the leaders met in Beijing in May, China said it would purchase 200 Boeing jets. Industry sources told Reuters that longer-term negotiations could eventually involve as many as 500 737 MAX aircraft, as well as wide-body planes.

Technology and critical minerals are likely to be another major source of tension. Beijing wants Washington to delay restrictions that could limit thousands of Chinese companies’ access to advanced U.S. technology. Washington, meanwhile, is urging China to ease export restrictions on rare earths and other critical minerals.