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October 30, 2025

Good morning. Andrew here. Consider this split screen: Just before President Trump said he reached an agreement (at least a temporary one) with China on tariffs and other trade matters, he threatened to resume testing nuclear weapons for the first time in three decades. The good news is that there appears to be a tariff truce, but there is clearly more negotiating to go. We’ve got the details below.

Also: We’re looking at the fallout from yesterday’s Fed decision, and the latest quarterly results of Alphabet, Meta and Microsoft — and the questions that the market is asking about A.I. spending. (Was this newsletter forwarded to you? Sign up here.)

President Trump and President Xi Jinping of China covered a range of issues in their meeting today. But can they reach a lasting deal? Haiyun Jiang/The New York Times

The latest on Trump-Xi talks

President Trump and President Xi Jinping of China appear to have covered a lot of ground in their meeting today in South Korea.

Details have been emerging throughout the morning, with Trump calling it an “amazing meeting.” Beijing had a more measured response.

But investors appear underwhelmed. It’s unclear whether the two economic powers achieved a true breakthrough, or merely a pause in hostilities from their trade war. Bourses in China and Europe dipped, and S&P 500 futures point to a weak open. Yesterday’s Fed decision and Big Tech earnings could be weighing on investors, too. (More on that below.)

The upshot: The two sides made major, if temporary, concessions. They agreed to delay some of the most punitive trade measures, including on certain tariffs and export curbs.

Also:

What’s not in the deal — so far: There is no word on key issues, such as the trade in semiconductors for artificial intelligence. This week, Trump had said that “We’ll be speaking about Blackwells,” referring to Nvidia’s high-end chips that Chinese companies seek. Shares of Nvidia fell in premarket trading.

Despite Trump’s assertion, it remains unclear how many American soybeans China will buy, a critical negotiating point for American farmers.

Big questions remain. While the post-meeting messaging has been upbeat — Trump said that “the meeting was a 12” on a scale of zero to 10 — there’s no clear sign that a more durable deal is in the works. A reminder: The last time the leaders met face to face, in 2019, Trump hailed the talks as a breakthrough, only for the two sides to ratchet up trade barriers afterward.

The uncertainty will most likely hang over companies and markets.

On the plus side: Trump said he planned to travel to China to meet with Xi in April, and invited China’s leader to the U.S. for a later visit.

On the down side: Shortly before the meeting, Trump rattled the international community when he wrote on social media that he had “instructed the Department of War” to restart nuclear weapons testing on an “equal basis” with other countries, for the first time in over three decades.

Trump later suggested that the announcement did not have to do with China.

OpenAI is said to be preparing an I.P.O. that could value it at $1 trillion. The ChatGPT maker has considered filing as soon as the second half of 2026, according to Reuters, and has looked at raising $60 billion or probably more. The company may be betting that this is the time to capitalize on investor enthusiasm for A.I. Nvidia, the chipmaker at the center of the A.I. boom, yesterday became the first publicly traded company to top a $5 trillion valuation.

Restaurant chains offer a mixed picture on consumer spending. Starbucks announced that its global sales had risen 1 percent last quarter, reversing an almost two-year slide in sales and offering positive news about the coffee chain’s turnaround under its C.E.O., Brian Niccol. But the chain closed 627 stores after months of struggles with weakening consumer spending, an issue that also hit Chipotle Mexican Grill. The food chain’s shares dropped 18 percent in premarket trading after it lowered sales forecasts again as consumers skip dining out.

Layoffs keep coming. General Motors laid off about 1,700 workers at its manufacturing sites yesterday, citing a slowdown in the electric vehicle market, while Paramount began cutting more than 2,000 positions, an expected outcome of its merger with the Hollywood studio Skydance. The downsizing comes after this week’s big cuts at Amazon, as well as news that PwC had ditched plans to add 100,000 hires. Such layoffs, and A.I.’s role in them, led Jay Powell, the Fed chair, to say yesterday that the bank would be watching the job market “very, very carefully.”

Powell’s ‘slow down’ message

For months, Jay Powell, the Fed chair, has had to contend with President Trump’s broadsides demanding that the central bank lower interest rates, no matter what. Now, Powell has to manage dissent among his fellow Fed policymakers, a fissure that has rattled the markets.

A recap: As expected, the Fed yesterday lowered its benchmark lending rate by a quarter point, bringing it under 4 percent for the first time since late 2022. There were two who broke ranks, though, with Stephen Miran, a Fed governor, calling for a half-point cut, and Jeffrey Schmid, the Kansas City Fed president, voting to leave rates unchanged. It was the first dual dissent since 2019.

The next surprise came from Powell. During the news conference explaining the cut, he told reporters multiple times that it would be a mistake to assume the bank would make another trim at its next meeting, in December, a move that many on Wall Street had penciled in.

Citing “strongly differing views” among members of the central bank’s Federal Open Market Committee, Powell said that a move to lower rates at the upcoming meeting “is not a foregone conclusion — far from it.”

The market response was swift. The S&P 500 fell, and the yields on Treasury notes and bonds spiked. (Bond yields climb when prices fall, often as a result of heavy selling.) The futures market this morning put the odds of another quarter-point cut in December at 69 percent; it was above 90 percent before Powell started speaking.

Wall Street is rethinking its assumptions. “Chair Powell does not think it is a slam dunk decision, and neither do we,” Sarah House and Michael Pugliese, economists at Wells Fargo, wrote in a research note yesterday.

The Fed is contending with contradictory signals. Inflation is running above the central bank’s 2 percent target, and there are continued signs of weakness in the labor market. Powell again said there was “no risk-free path” — meaning that the Fed risked reaccelerating inflation if it were to lower borrowing costs in the hopes of boosting hiring. On the plus side: Overall consumer spending has held up, even if lower income households have pulled back on purchases.

The shutdown is another problem. A lack of official government data has hobbled efforts by the Fed and much of Wall Street to forecast the economy. Powell, for one, is thinking about the brakes.

“What do you do if you’re driving in the fog? You slow down,” he said. “So I’m not committing to that. I’m just saying it’s certainly a possibility that you would say, we really can’t see, so let’s slow down.”

The A.I. spending spree rolls on

Artificial intelligence spending by tech giants shows no signs of slowing. But investors appear to be grading the companies on a tougher curve as they battle for market dominance.

Shares in Meta and Microsoft tumbled in premarket trading. The social media giant behind Facebook and Instagram reported quarterly results that fell short of Wall Street’s expectations, while Microsoft acknowledged that its cloud computing business was still playing catch-up with sky-high demand. Shares in Alphabet, Google’s parent company, zoomed higher after it posed blowout revenues aided by strong demand for its cloud business.

The spending numbers were astounding:

Will it pay off? The fear in some corners of the market is that the spending blitz could lead to a bubble. “No one needs reminding that history is full of episodes of technology exuberance that eventually left the early investors battered,” Dec Mullarkey, a managing director at SLC Management, told The Financial Times.

Executives remain bullish on A.I. demand. “We will increase our total A.I. capacity by over 80 percent this year, and roughly double our total data center footprint over the next two years,” Satya Nadella, Microsoft’s C.E.O., told investors. But the buildout comes as the company said that its data center capacity could not keep up with demand, spooking investors.

The spending spree appears far from over. Much of that will be spurred by the companies’ breakneck pursuit of what some call artificial general intelligence, or A.I. systems that match the power of human thinking, or more. “There’s a range of timelines” for when superintelligence might come, Mark Zuckerberg, Meta’s C.E.O., said on an analysts call.

“I think that it’s the right strategy to aggressively front-load building capacity, so that way we’re prepared for the most optimistic cases,” he added.

Up next: Amazon and Apple report after the closing bell today.

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