Markets Rally Ahead of Trump-Xi Summit as Oil Eases, AI Stocks Surge

Markets woke up Monday in a better mood than they'd been in for weeks. The S&P 500 climbed 1.5 percent—its best day since early August—while the Nasdaq Composite jumped 2.3 percent to close at a record high for the first time since June. The Dow added a more modest 0.7 percent. Three things had shifted: oil prices had retreated, Treasury yields had eased back from a two-decade peak, and chipmakers had surged. The rally was built on relief as much as optimism.

Oil had been a persistent weight on markets, but on Monday, West Texas Intermediate futures dropped 4.5 percent to settle at $95.78 a barrel, briefly dipping below $100. Brent crude touched a session low of $98.98 before closing at $100.34. The pullback reflected two developments: signals that Saudi Arabia's East-West pipeline disruption was less severe than initially feared, and the prospect of talks between the Trump administration and Iran, which had stripped out what traders call the war premium—the extra cost built into oil when geopolitical risk feels acute. Trump had signaled openness to meeting Iranian President Masoud Pezeshkian on the sidelines of the UN General Assembly that week, though Tehran had not confirmed reciprocal interest. The administration kept sanctions and military options on the table, but the mere possibility of dialogue was enough to ease crude.

Treasury yields retreated as traders pared bets on further Federal Reserve tightening following last month's rate hike. Stock futures were little changed in early trading Tuesday, suggesting the market was waiting to see what would happen next. That next thing was arriving Wednesday: Chinese leader Xi Jinping was expected to land at Joint Base Andrews at 4 p.m., only the second foreign leader Trump had personally met at the airport during this term, after Vladimir Putin in August 2025. A state dinner was set for Thursday at the White House.

The pageantry was substantial, but analysts expected the substance to be narrower. The two leaders were likely to extend the trade truce reached in Busan, South Korea, the previous October and establish a Board of Trade for non-sensitive goods. A parallel investment framework had seen little progress. What had changed since their last meeting was the urgency around artificial intelligence. Chinese AI labs had narrowed the gap with their U.S. counterparts over the past year, sharpening Beijing's confidence and adding a new item to Washington's list of concerns: staying ahead of China in the AI race. Meanwhile, discussion of Taiwan was expected to take a back seat to Iran.

The administration's position on AI liability was hardening. Treasury Secretary Bessent told CNBC the administration would not hand AI developers a federal liability shield, saying flatly that humans—not the AI systems themselves—bore responsibility for outcomes. OpenAI had proposed the opposite approach at the global level, built on existing AI safety institutes, to govern recursive self-improvement, the capability that allows a model to upgrade itself without human input. The company argued in a blog post that navigating this transition safely required alignment research to keep pace with capabilities, ensuring systems remained aligned with human values and under human control. Washington and Silicon Valley were not aligned.

Elsewhere in the economy, momentum was building in other sectors. Eli Lilly's CEO Dave Ricks told CNBC that hundreds of thousands of seniors had started GLP-1 treatment since Medicare's obesity-drug coverage opened in July, with Lilly capturing roughly seven in ten of them. Nissan was weighing a shift to three-shift production at its plants in Smyrna, Tennessee, and Canton, Mississippi, which would lift annual U.S. output from about 487,000 units toward 1 million without requiring new factory construction. Bitcoin had pushed above $86,000 on Monday, briefly touching $86,349.90, its highest level since late January, extending a sharp recent rally, though it remained well below its October 2025 peak of $126,000. Bitwise's chief investment officer called the move the start of crypto spring, while analysts flagged $90,000 as the next test if the $75,000 support level held.

The question hanging over all of this was whether Washington and Beijing could match Monday's market mood when the two leaders sat down. Oil prices and chip stocks don't write trade deals. Thursday would tell.