US stock indices dropped slightly after a day filled with ups and downs. The indices opened strong but fell into the negative as investors awaited the FOMC rate decision. Both the S&P and NASDAQ reached record highs during the day, hitting 6626.99 and 22397.50, respectively. The NASDAQ 100 ended its nine-day winning streak with a tiny loss of 0.08%. The NASDAQ composite also dropped a bit after rising in eight of the last nine days.

Key Indices Performance

Here are the final results for major indices: – Dow Industrial Average: -0.27% – S&P Index: -0.13% – NASDAQ Index: -0.07% – Russell 2000: -0.09% Among the 11 sectors of the S&P 500, Energy performed the best, while Utilities struggled the most. Five sectors saw gains, while six faced losses: – Energy: +1.74% – Consumer Discretionary: +0.82% – Consumer Staples: +0.24% – Telecom Services: +0.27% – Health Care: +0.03% – Industrials: -0.27% – Technology: -0.20% – Materials: -0.50% – Financials: -0.57% – Real Estate: -0.68% – Utilities: -1.81% The market seems to be holding back as we await tomorrow’s FOMC decision. The slight pullback from record highs suggests that traders might be taking profits or securing positions. The CME FedWatch Tool shows an 85% chance of a 25 basis point increase, but the main concern is the future guidance for the rest of the year.

Market Tension and Trading Strategies

The current market tension signals an opportunity to trade volatility. The VIX has risen over 15% in the last week, now at around 17.5, reflecting uncertainty after last week’s August CPI report showed a slightly high inflation rate of 3.9%. Considering buying straddles or strangles on indices like the SPX could be a good strategy to prepare for larger-than-expected market moves, no matter the direction. The end of the NASDAQ’s winning streak indicates possible exhaustion. This could lead to a period of consolidation or a small pullback, even if the Fed’s outcome is favorable. Selling out-of-the-money call spreads above the NASDAQ’s new high of 22397.50 may be a smart way to profit from this potential ceiling. Sector performance highlights concerns about inflation and interest rate expectations. Energy’s strength is linked to WTI crude prices staying above $95 a barrel due to OPEC+ production cuts announced earlier this month. The weakness in utilities and real estate shows that the market is preparing for prolonged higher rates, a scenario last seen during the aggressive rate hikes of 2023. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now