"I am optimistic that they will strike a deal. I don't think it's going to be the deal that either side wants, but I think there will be some concessions," said Kirk Hartman, global chief investment officer at Wells Fargo Asset Management. "I think this is more about protecting U.S. technology as much as it is trade, so I think you will see some comments on that front."
Trump told reporters Thursday that he was "close" to doing something on trade with China but added he wasn't sure if he wanted to do it. "Because what we have right now is billions and billions of dollars coming into the United States in the form of tariffs or taxes, so I really don't know," he said.
Meanwhile, there were reports that White House advisor Peter Navarro would be attending the dinner between Trump and Xi. News of his attendance dampened hopes that a trade deal could be hatched at the meeting given his longstanding hawkish tone on U.S.-China trade.
Elsewhere, the Wall Street Journal reported that officials from both governments said the U.S. and China are exploring a trade pact that would halt further tariffs from Washington in exchange for new talks looking at major changes to Beijing's economic policies.
"Both sides have so much at stake here that they going to reach some kind of agreement," Wells Fargo's Hartman said, adding that any agreement at the meeting "will be extremely positive for the market."
— CNBC's Saheli Roy Choudhury contributed to this report.