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 US-China trade deal and looked forward to a week packed with high-profile technology earnings and a widely expected US interest rate cut.

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

Earnings from five of the "Magnificent Seven" megacap companies – Microsoft, Apple, Alphabet, Amazon and Meta – later this week will test the market rally's endurance, 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 Scott Wren, senior global market strategist at Wells Fargo Investment Institute.

The Dow Jones Industrial Average rose 337 points, or 0.7 percent, to 47,544. The S&P 500 advanced 83 points, or 1.2 percent, to 6,875 for its first close above the 6,800 level. The Nasdaq Composite gained 432 points, or 1.9 percent, at 23,637.

Among the S&P 500's 11 major sectors, three rallied sharply. Communication services added 2.3 percent with Alphabet's 3.6 percent rally leading the way.

Technology ended up 2 percent at a fresh record close, along with the Philadelphia Semiconductor index, which added 2.7 percent.

The biggest advance in tech came from Qualcomm, which surged 11 percent after it unveiled two AI chips for data centres, with commercial availability starting next year.

AI chip leader Nvidia also rose 2.8 percent and provided the S&P 500's biggest boost.

Consumer discretionary finished up 1.5 percent, led by Tesla which rallied 4.3 percent on optimism around the US-China talks.

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 US government shutdown holds up key data releases.

Among individual stocks, Keurig Dr Pepper climbed 7.6 percent after lifting its annual sales forecast and raising about US$7 billion to finance its purchase of Dutch coffee giant JDE Peet's.

Janus Henderson shares rallied 11.3 percent after it confirmed an acquisition proposal from Trian and General Catalyst. (Reuters)