US stocks are gaining value, with major indices rising. Even though there are mixed signals about trade relations with China and the EU, optimism is growing over a new UK-US trade deal and possible interest rate cuts. The Federal Open Market Committee will announce its interest rate decision next week. If inflation fails to meet expectations, they might consider cutting rates before reaching the 2% inflation target, especially since service inflation is going down.

Current Major Indices

Here are the current major indices with slight gains: – Dow Jones: 44,747.51 (+0.12%) – S&P 500: 6,375.84 (+0.20%) – Nasdaq: 21,096.95 (+0.19%) – Russell 2000: 2,244.90 (−0.32%) Today’s top performers include: – Roblox: +2.84% – Palantir: +2.77% – AMD: +2.52% – Tesla: +2.45% Intel is the biggest loser today, facing doubts after its earnings report: – Intel: −8.33% – Grayscale Bitcoin: −3.08% – MicroStrategy: −2.14% Other notable declines include companies like IBM and Southwest Airlines.

Upcoming Interest Rate Decision

The upcoming interest rate decision has traders on high alert. According to the CME FedWatch Tool, there is over a 90% chance rates will stay the same. The chairman’s comments will be crucial; a hint at an early rate cut could energize the market. A similar dovish stance in late 2023 led to a strong market rally, setting a precedent for what we might see now. The CBOE Volatility Index (VIX) is currently around 13, much lower than its usual average, indicating a calm market. This situation may offer a chance to purchase cheaper protective measures or calls on major indices ahead of Wednesday’s announcement. Historically, the VIX can jump by 10-20% during a Fed decision, making long volatility positions appealing. The stark contrast in the semiconductor sector, with one company dropping over 8% while others like AMD and Taiwan Semiconductor rise, suggests an opportunity for pair trading. We are exploring options strategies that involve going long on the strong performers and shorting the weaker one to take advantage of this trend. This approach reduces the risk from specific company performance while tapping into broader positive feelings about the technology sector. Strength in consumer brands like Chipotle and Shopify indicates that traders are confident in continued spending, despite inflation worries. The latest retail sales report revealed a modest 0.1% month-over-month increase, avoiding the feared decline. We see this as a signal to consider bullish call spreads on the Consumer Discretionary Select Sector SPDR Fund (XLY) to benefit from this ongoing strength. Create your live VT Markets account and start trading now.

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