Dow Jones futures rose by 1.12% on Monday, hitting over 46,200 during European trading hours. S&P 500 futures climbed 1.52% to near 6,700, while Nasdaq 100 futures jumped 2.07% to around 24,900. This increase in US index futures is linked to expectations that the US Federal Reserve will cut rates more by the end of the year. Markets currently see a 96% chance of a 25-basis-point rate cut in October and an 87% chance of another cut in December.

US Consumer Confidence Report

US consumer confidence dipped slightly in early October, supporting the idea of a rate cut. The University of Michigan’s Consumer Sentiment Index fell to 55.0. Meanwhile, the Current Conditions Index rose to 61.0, but the Expectations Index dropped to 51.2. Market sentiment improved amid easing US-China trade tensions. President Trump shared his positive views on China’s economy via Truth Social, suggesting there’s no need for a meeting with President Xi at an upcoming summit. In the previous session, the Dow Jones fell by 1.9%, the S&P 500 by 2.71%, and the Nasdaq by 3.56%. These declines were largely due to losses in technology and chip stocks like Nvidia, AMD, and Tesla. With futures indicating a strong rebound today, we witness a notable conflict between market sentiment and underlying economic data. The sharp rise in Nasdaq futures, now up more than 2%, reflects traders’ hopes for rate cuts this month. Following the market’s worst day since April 2025, this rally underscores traders’ reliance on lower interest rates to drive growth.

Fed Policy and Economic Indicators

Expectations for a shift in Fed policy are nearly fully priced in, with the CME FedWatch tool showing a 96% chance of a rate cut in October. Recent inflation data supports this view; the September 2025 Consumer Price Index (CPI) showed a decline in headline inflation to 2.8% year-over-year. This marks a significant shift from the aggressive rate hikes in 2022 and 2023, allowing the Fed to consider easing. However, weaker consumer confidence serves as a caution. Although the sentiment reading of 55.0 exceeded expectations, it remains historically low. Additionally, initial jobless claims have slowly increased over the past month, reaching 235,000. This suggests that the economy may be more fragile than the market rally indicates, raising concerns about the sustainability of the recovery. The tech sector is currently a focal point, evident in the Nasdaq’s previous session decline followed by its leadership in this pre-market rally. For traders, this indicates high volatility, making options on indices like the Nasdaq 100 appealing for short-term trading. In light of the recent sell-off, buying call options could capitalize on any immediate bounce, but holding some protective puts is a wise way to guard against a possible sentiment shift. Additionally, mixed signals regarding US-China relations pose major headline risks that could swiftly erase gains. A positive statement from Trump could be overshadowed by the threat of 100% tariffs, a strategy employed frequently between 2018 and 2020. This unpredictability makes holding leveraged long positions overnight quite risky, and traders should be ready for sudden pivots based on geopolitical events. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now