Stock Market Performance

The Dow industrial average rose by 0.68%, while the S&P 500 dropped by 0.12%, and the NASDAQ fell by 0.52%. The Russell 2000 saw a gain of 1.05%, thanks to optimism around lower interest rates helping small businesses. In the bond market, short-term yields increased, and long-term yields decreased. The 2-year yield is at 3.532%, while the 30-year yield stands at 4.632%. In other markets, crude oil fell by $0.16 to $64.36, gold decreased by $3.17 to $3686, and Bitcoin dropped by $1200 to $115,620. With the Federal Reserve’s decision coming later today, the market is expecting a 25 basis point rate cut. This anticipation is reflected in the mixed performance of the US stock market, indicating a rotation is in progress. Recent data shows US Q2 GDP growth slowed to 1.5%, and although Core PCE inflation has dropped from its 2024 highs, it remains steady at 2.8%.

Market Strategy Suggestions

The difference in performance between the tech-heavy NASDAQ and the value-focused Dow Jones suggests a clear approach. We should think about options that support more defensive sectors. For example, selling puts on consumer staples like Procter & Gamble or healthcare stocks like Merck could earn some premium. Meanwhile, buying puts on the QQQ ETF might protect against a further decline in growth stocks, which react more to long-term rate changes. The bond market tells a complicated story as the yield curve flattens. This signals uncertainty about the Fed’s direction after the expected cut. Traders might use SOFR futures to bet that short-term yields will stay high, in line with the “higher for longer” narrative that has shaped discussions throughout 2024. As for volatility, the VIX index has been around 17 in the days leading up to this meeting. Historically, following a major Fed announcement that resolves uncertainty, implied volatility often drops sharply. Selling VIX futures or at-the-money straddles on the S&P 500 could be a smart way to profit from this expected drop in volatility after the announcement. In Europe, mixed performances reflect specific country issues rather than a unified regional trend. The weakness in Italy’s FTSE MIB, struggling with political uncertainty and debt problems for the past year, contrasts with Germany’s DAX, which has been more resilient. A pairs trade, going long on DAX futures and short on FTSE MIB futures, could take advantage of this ongoing economic split. Create your live VT Markets account and start trading now.

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