Nasdaq and S&P 500 futures trend higher as Iowa surprise weighs on Trump trade

U.S. stock futures rose on Monday, preparing for a week of potentially big market-moving events – the presidential election and the Federal Reserve's policy decision.

S&P 500 futures (ES=F) rose around 0.2% after staging a comeback after a week of losses. Contracts on the tech-heavy Nasdaq 100 (NQ=F) rose 0.1%, while Dow Jones Industrial Average futures (YM=F) hovered above the flat line.

A solid earnings season so far and optimism about a rate cut are giving the market reason to cheer ahead of Tuesday's election, a big risk event for markets. The new president – ​​whether Kamala Harris or Donald Trump – will set the course for the economy in the coming years. The head-to-head race means investors will have to prepare for volatility on election day itself.

Read more: Yahoo Finance's guide to the presidential election and what it means for your wallet

But with just one session to go, weekend polls showed Harris with a surprising lead in Iowa and gaining ground elsewhere, a sign that the Democrat has a better chance of winning than Wall Street had calculated. The dollar fell by the most in a month as traders unwound bets on a Trump victory. Treasury yields also fell, with the benchmark 10-year yield (^TNX) falling nearly 10 basis points to 4.30%.

Also of great importance is the Fed's two-day monetary policy meeting, which begins a day later than usual given Wednesday's election.

Wall Street is confident that Chairman Jerome Powell will deliver a 0.25% interest rate cut on Thursday despite signs of stubborn inflation and gloomy labor market signals. With this in mind, the focus is on the actions the Fed could take at future meetings, as the market now sees three fewer rate cuts by the end of 2025 than previously expected.

Read more: What the Fed's interest rate cut means for bank accounts, CDs, loans and credit cards

At the same time, profits continue to rise, with struggling AI server makers Super Micro Computer (SMCI), Arm (ARM) and Qualcomm (QCOM), among others, reporting this week. With 70% of the S&P 500 reporting quarterly results, the benchmark index is on track for a fifth straight quarter of earnings growth and recovering from the 2023 earnings recession.

Elsewhere, oil prices rose 3% after OPEC+ decided to postpone a planned production increase for at least a month, and Iran ratcheted up tensions in the Middle East by warning of a “devastating response” to Israel's attacks.