US STOCKS-Wall St scales fresh highs on tech earnings, US-China trade optimism

By Sinéad Carew and Pranav Kashyap

Oct 27 (Reuters) - Wall Street's main indexes posted record closing highs for the second day in a row on Monday as investors were hopeful about the prospects for a U.S.-China trade deal and looked forward to a week packed with high-profile technology earnings and a widely expected U.S. interest rate cut.

U.S. President Donald Trump and his Chinese counterpart Xi Jinping are due to meet on Thursday to decide on a framework that could pause tougher U.S. tariffs and China's rare-earth export curbs, easing market jitters around a trade war and sending Wall Street's "fear gauge" VIX .VIX down to a one‑month low.

During weekend TV appearances, U.S. Treasury Secretary Scott Bessent talked about agreements around China buying U.S. soybeans and its rare-earth exports after two days of trade talks in Malaysia.

Along with the upcoming meeting, Bessent's comments boosted hopes for easing U.S.-China tensions, said Scott Wren, senior global market strategist at Wells Fargo Investment Institute in St. Louis, Missouri.

Earnings from five of the heavyweight "Magnificent Seven" group - Microsoft MSFT.O, Apple AAPL.O, Alphabet GOOGL.O, Amazon AMZN.O and Meta META.O - later this week will test the endurance of the market's rally, which has largely depended on optimism around growth and capital expenditures related to artificial intelligence.

"With five of the Mag Seven reporting this week, what the market expects to hear is confirmation that all this AI CapEx is coming through, that the revenues and profits from AI are coming through," said Wren.

According to preliminary data, the S&P 500 .SPX gained 82.92 points, or 1.23%, to end at 6,874.61 points, while the Nasdaq Composite .IXIC gained 431.22 points, or 1.86%, to 23,636.09. The Dow Jones Industrial Average .DJI rose 333.87 points, or 0.71%, to 47,540.99.

Among the S&P 500's 11 major sectors, communication services .SPLRCL, consumer discretionary .SPLRCD and technology .SPLRCT all rallied sharply. The laggards were materials .SPLRCM and consumer staples .SPLRCS.

The Philadelphia SE Semiconductor index .SOX hit a fresh record high. Qualcomm QCOM.O shares surged after it unveiled two AI chips for data centers, with commercial availability from next year. AI chip leader Nvidia NVDA.O also rose.

U.S.-listed shares of Chinese companies including Alibaba Group Holding BABA.N, JD.com JD.O, PDD Holdings PDD.O and Baidu BIDU.O also rallied on the day.

FED RATE CUT FULLY PRICED IN

Cooler inflation data last week all but sealed bets for a 25-basis-point rate cut by the Federal Reserve on Wednesday, and investors will closely monitor Chair Jerome Powell's comments for clues on a December cut, as the U.S. government shutdown holds up key data releases.

Keurig Dr Pepper KDP.O climbed after lifting its annual sales forecast and raising about $7 billion to finance its purchase of Dutch coffee giant JDE Peet's. Lululemon LULU.O shares rose after the company announced a partnership with the National Football League to launch an apparel collection.

Janus Henderson JHG.N shares rallied after it confirmed an acquisition proposal from Trian and General Catalyst.

U.S.-listed shares of Argentine companies jumped after President Javier Milei's election victory.