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Technology stocks increase as semiconductors bounce back, with investor sentiment staying cautiously optimistic across sectors.
Tech stocks are rising, thanks to a recovery in the semiconductor industry. Nvidia’s stock rose by 3.31%, showing confidence in the sector. Meanwhile, AMD fell by 2.86%, indicating some challenges ahead.
Consumer cyclicals are holding steady. Amazon had a small gain of 0.14%. In communication services, Google increased by 0.94%, and Meta rose by 1.62%, showing continued interest in these companies.
Bailey from the Bank of England suggests that further bank rate cuts may happen due to global pressures.
The Governor of the Bank of England expects to lower the bank rate in the future, but we don’t know exactly when or by how much.
Despite some global factors affecting long-term gilt rates, there is no sign of stress in the gilt markets. Currently, the market predicts a drop of 33 basis points by next July.
Opportunity in Divergence
There is a chance to take advantage of the difference between the Bank of England’s cautious tone and the market’s low expectations for rate cuts. The market thinks only 33 basis points of easing will happen by next July, which seems low considering the Governor’s hints at further reductions. This indicates a disconnect that we can use to our advantage in the coming weeks. Recent economic data supports the need for more easing than the market currently anticipates. The UK’s Consumer Price Index (CPI) for August 2025 dropped to 2.8%, indicating a clear downward trend, while GDP growth for Q2 2025 was only 0.1%. These numbers give the Monetary Policy Committee the opportunity to stimulate a slowing economy. Therefore, we should look to increase positions that will benefit from decreasing short-term UK interest rates. This may involve receiving on short-end SONIA swaps or buying front-end Short Sterling (SONIA) futures contracts. The aim is to take advantage of the market adjusting to the possibility of at least two 25 basis point cuts by mid-2026. However, the global situation pushing up long-term gilt rates presents a different challenge. The US Federal Reserve is maintaining steady rates after the August 2025 non-farm payrolls report showed a strong addition of 250,000 jobs. This external pressure will likely keep 10-year and 30-year gilt yields high, regardless of the Bank of England’s actions.Ideal Environment for Yield Curve Steepener Trades
This situation is perfect for yield curve steepener trades. We can position ourselves for the spread between 2-year and 10-year gilt yields to widen by buying 2-year futures and selling 10-year gilt futures. This strategy profits as the front end of the curve rises on rates cut expectations while the long end remains stable due to global pressures. The uncertainty surrounding timing also suggests an increase in interest rate volatility. Given the instability in gilt markets from 2022 to 2023, we know that guidance can change rapidly. Buying derivatives like swaptions or options on SONIA futures could be an affordable way to gain exposure to unexpected rate movements in either direction. Create your live VT Markets account and start trading now.Rising bond sales are boosting the US dollar amid concerns about Fed independence.
The bond market responded to the recent FOMC decision with a strong outlook. US 30-year yields rose by 6.3 basis points to 4.73%, marking the first increase this month. Shorter-term notes also changed, with two-year yields increasing by four basis points to 3.58%. These adjustments helped boost the US dollar, which had previously fallen to its lowest level since 2022 but has now stabilized.
Fed Strategy and Market Response
Fed Chair Powell stated there’s no urgency for more rate cuts after the recent adjustment. Fed officials Waller and Bowman seem resistant to outside political pressure, supporting a 25-basis point cut but not agreeing with new Governor Stephen Miran’s push for a more aggressive 50-basis point reduction. This approach is likely to help control inflation and keep the US dollar strong, showing confidence in the Fed’s independence. The market sees this as a way to maintain both the Fed’s autonomy and economic stability. The US dollar is gaining strength as the market views the Federal Reserve as less inclined to cut interest rates than before. It might be wise to explore trades that could benefit from the dollar’s renewed momentum, especially after the August 2025 inflation report showed a slight uptick at 3.1%. Strategies like buying call spreads on the U.S. Dollar Index (DXY), which has sharply rebounded over 101 from its recent lows, could be effective. Rising bond yields, especially at the long end, indicate that the market is shifting its expectations for future rate cuts. The 30-year yield reaching 4.73% signals that the “higher for longer” perspective is gaining traction again. Traders might consider bearish positions on bonds, such as selling 10-year Treasury note futures or buying puts on long-duration bond ETFs. We recall how the Fed had to raise rates significantly in 2022 and 2023 to combat inflation. Their current cautious approach suggests they want to avoid easing policies too early. The firm stances from key figures like Waller and Bowman reinforce the central bank’s independence and credibility in fighting inflation. This environment supports a fundamentally stronger dollar compared to other currencies, where central banks may have to ease policies more quickly.Impact on Stock Market and Volatility
This situation is also creating challenges for the stock market, which expected quicker rate cuts to boost its rally. The strong August 2025 jobs report, showing an increase of 210,000 jobs, gives the Fed more reason to be patient. This suggests that hedging equity exposure with S&P 500 put options or selling index futures could be a smart strategy in the upcoming weeks. The swift change in market expectations could lead to higher volatility across various asset classes. With uncertainty about the Fed’s direction, we can anticipate larger price swings in currencies and interest rates. This makes strategies like buying volatility through instruments like straddles on major currency pairs or options on the VIX appealing. Create your live VT Markets account and start trading now.Intel shares jumped 25% after Nvidia revealed a $5 billion stock investment.
Shares of Intel jumped 25% at the opening bell after Nvidia announced a $5 billion investment in Intel common stock. This investment comes as the two companies plan to work together on custom data center and PC products over several generations.
Intel’s shares are now at their highest level since July 2024, nearly doubling from their recent low earlier this year. Nvidia plans to buy Intel shares at $23.28 each, acquiring about 4% of the company, which is a small part of Nvidia’s $4 trillion market value.
Historic Collaboration
Intel will create a custom chip for Nvidia’s data centers and a PC chip that combines Nvidia’s NVLink with both companies’ technologies. This partnership is seen as a groundbreaking step to merge Nvidia’s AI capabilities with Intel’s CPUs. Both companies believe this collaboration will expand ecosystems and pave the way for the next era of computing. They will hold a joint press conference at 1 PM ET to discuss their plans. With Intel’s shares soaring 25%, the implied volatility of its options has surged. The 30-day volatility for Intel’s stock has jumped from around 40% to over 80%, making options very expensive. Due to this high cost, focus should shift to strategies that sell this inflated premium. For those confident in this new valuation holding, consider selling cash-secured puts on any small drops in the coming days. The high premium collected can provide a safety net and allows for a better entry point if the stock declines. Weekly or monthly puts with strike prices around $22 or $23 may now offer unusual returns.Option Strategies and Market Reactions
If we anticipate more upside but are cautious about high costs, bull call spreads are a smart choice. You can buy a November $24 call and sell a November $27 call to limit cost and risk. This strategy profits if Intel’s stock continues to rise toward levels last seen in summer 2024, without fully paying for the increased volatility. This situation feels reminiscent of other major strategic investments from the early 2020s, which often established long-term support for the target company’s stock. Speculation about a possible multi-year acquisition path—though distant—should limit downside risk in the near term. This further supports the idea of selling puts, as a complete reversal of today’s gains seems unlikely. Market data shows call volume has soared to over 15 times its 20-day average, with a strong focus on October and January expiration dates. The put-to-call ratio has dropped below 0.4, indicating strong bullish sentiment after the announcement. We will need to monitor whether this intense sentiment persists or creates opportunities for contrarian strategies as initial excitement fades. Create your live VT Markets account and start trading now.US stock futures ease but stay positive after FOMC decision, driven by tech gains
S&P 500 futures are up by 0.6%, suggesting a positive start to the market. After some initial confusion following the Federal Open Market Committee’s decision, the mood improved during European trading.
Tech stocks are leading the way, with Nasdaq futures rising by 1%. Intel shares have jumped by 28% after Nvidia announced a $5 billion investment in data center and PC products. Nvidia’s shares are also up by 3%.
Market Path Forward
After some uncertainty from the Federal Reserve’s meeting yesterday, the market is now showing a clearer direction with a strong start led by tech stocks. The VIX, a measure of market volatility, spiked above 22 after the announcement but has since fallen back below 18 this morning. This drop in implied volatility makes buying options cheaper and suggests traders expect a steady upward movement rather than more fluctuations. This positive outlook is mainly due to the belief that the Fed will maintain its current policies. A recent CPI report from August 2025 showed inflation cooling to 3.1%, helping the market regain confidence after early-year inflation worries. This situation reminds us of late 2023 when investors started anticipating a friendlier central bank policy. Today, the Nasdaq is taking the lead, boosted by Nvidia’s $5 billion investment into Intel, which is creating excitement across the semiconductor industry. For options traders, it’s a good time to buy near-term call options on the QQQ ETF or a selection of semiconductor stocks to capitalize on this momentum. The strong pre-market gains in Intel and Nvidia highlight that institutional money is currently favoring big-cap tech.Semiconductor Sector Focus
The surge in the semiconductor sector is becoming the main focus for the coming weeks. We’re seeing a lot of activity in call options on the SOXX semiconductor ETF, with traders looking at strikes 5-10% above the current market price with expirations in October 2025. This shows a strong belief that yesterday’s volatility was just a brief pause before the market climbs higher, fueled by advancements in artificial intelligence and spending on data centers. Create your live VT Markets account and start trading now.Philadelphia Fed business index rises to 23.2, surpassing expectations and past results
The Philadelphia Fed business index for September is at 23.2. This is much better than the expected 2.5 and an improvement from -0.3 last month. Employment has dropped slightly to 5.6 from 5.9. Prices paid also decreased significantly to 46.8 from last month’s high of 66.8.
New orders increased to 12.4 from -1.9 last month, and shipments rose to 26.1 from 4.5. Unfilled orders are down to -6.6 from -16.8, and delivery times improved a bit to -3.4 from -5.4. Inventories climbed to 15.0 from -6.2, and the average workweek expanded greatly to 14.9 from 4.7.
Six Month Outlook
Looking ahead six months, the index is at 31.5, up from 25.0 last month. The index for capital expenditures six months ahead fell to 12.5 from 38.4. Compared to last month, new orders, prices paid, and employment show mixed predictions. Earlier this week, the Empire Fed manufacturing survey fell to -8.7, which was worse than the expected +5.0 and down from +11.9 previously. A special question in the Philly Fed report indicates an increase in business activity. Today’s Philly Fed manufacturing report came as a big surprise, showing strong growth when only modest growth was expected. This contrasts sharply with the weak Empire Fed survey earlier this week, which indicated contraction. We need to keep in mind this regional economic divergence, which adds some uncertainty to the market. The report shows a solid rise in current business activity, with new orders and shipments bouncing back after being negative last month. The increase in the average workweek suggests firms are ramping up production quickly. This could mean a possible uplift in the industrial economy that hasn’t been accounted for in the market.Inflation and Market Impact
Most importantly, the prices paid component dropped sharply, indicating that inflationary pressures are easing significantly despite the rise in activity. This corresponds with last week’s government data showing the August Consumer Price Index (CPI) cooled to 2.9% year-over-year. Strong growth combined with falling inflation is a perfect scenario for the Federal Reserve. Given this data, we can expect the market to lower the likelihood of any further interest rate hikes this year. The Fed can take its time, a point emphasized by the Chair at Jackson Hole just last month. Traders in derivatives should consider positions that benefit from stable or falling interest rates, like futures on the SOFR or Fed Funds rate. However, there’s a major warning sign: the plunge in the six-month forward capital expenditure index. While businesses are generally positive about the upcoming six months, they are cutting back on long-term investment plans. This suggests that the current strength may not last deep into 2026. These mixed signals call for a cautious yet opportunistic approach in the coming weeks. We recommend expressing a bullish view with a clear time frame. For example, consider buying near-term call options on the S&P 500 or industrial sector ETFs set to expire in October and November. We observed a similar mix in regional Fed surveys late in 2023, which led to a turbulent but ultimately upward market in the following months. Create your live VT Markets account and start trading now.Initial jobless claims improve to 231,000, continuing claims fall to 1.92 million
US initial jobless claims were reported at 231,000, which is better than the expected 240,000. The previous week’s claims were revised from 263,000 to 264,000. Continuing claims stood at 1,920,000, also below the predicted 1,950,000. The earlier figure was adjusted from 1,939,000 to 1,927,000.
These numbers indicate improvement, as they are better than expected. Last week’s increase in initial claims was affected by fraudulent filings in Texas. The revision of prior claims showed a small increase. Overall, jobless claims remain stable, and continuing claims have improved.
Strong Labor Market Signs
This week’s decline in jobless claims to 231K shows that the labor market is strong, especially after we discount last week’s spike due to a reporting error in Texas. Continuing claims are also decreasing, which is a positive sign for the economy. This strength makes it harder for the Federal Reserve to justify lowering interest rates anytime soon. With the August 2025 CPI report showing inflation at 3.4%, this strong jobs data supports the Fed’s decision to maintain higher rates for an extended period. The market had been anticipating a possible rate cut before the year ends, but that now looks unlikely. We should expect the Fed to stay hawkish in its meeting next week.Market Implications
For interest rate derivatives, this indicates that options betting on rate cuts are likely overpriced. We should think about selling calls on December 2025 and March 2026 SOFR futures because the chance of a cut during that period has decreased. This approach profits if the market shifts to a “higher for longer” reality. In equity markets, this positive economic news may actually be negative for stocks, similar to what we saw during the 2023 rate hikes. With the S&P 500 up nearly 15% year-to-date in 2025, a hawkish Fed might trigger a market pullback. Buying puts or put spreads on the SPY for October expiration could be a smart way to protect against this risk. The tension between a strong economy and a tight Fed is likely to increase market volatility. The VIX is currently near a low of 14, making it relatively inexpensive to buy protection against a spike in volatility. We might consider buying VIX calls ahead of next week’s FOMC announcement. Create your live VT Markets account and start trading now.European stocks increase after the Fed’s decision, while the BOE keeps interest rates steady
Cryptocurrency and Commodities Overview
Gold prices dropped to a low of $3,634 but have since recovered by 0.2% to $3,666. WTI crude oil also increased by 0.4%, reaching $64.31. In the cryptocurrency world, Bitcoin rose by 1.3%, now trading at $117,178. The market is eagerly awaiting U.S. data, especially weekly initial jobless claims, which could either support or challenge the Federal Reserve’s current outlook. Equities are responding positively, with expectations that the Fed may be close to its peak. Traders are considering bull call spreads on the S&P 500 to take advantage of potential gains. The VIX is hovering around 17, indicating some ongoing uncertainty. These defined-risk strategies are useful for protecting against a downturn if upcoming U.S. data comes in unexpectedly strong. The drop in 10-year yields to 4.06% indicates that the market is questioning the Fed’s cautious stance, similar to trends seen in late 2023. We believe buying call options on 10-year Treasury futures (ZN) could be a good bet on this trend continuing. This strategy will work if jobless claims or inflation data show the economy cooling more quickly than expected.Bank of England Policy Outlook
The Bank of England’s choice to maintain its rate at 4.00% creates a clear contrast with the Federal Reserve. This difference is putting pressure on the pound as capital moves toward currencies that offer higher returns. Buying puts on GBP/USD seems like a straightforward way to trade this trend over the coming weeks. New Zealand’s economy is showing signs of weakness, with a recent GDP report revealing a 0.2% contraction for the second quarter. This makes the NZD vulnerable, especially since other central banks are either maintaining their rates or adopting a hawkish stance. The 1.0% drop in NZD/USD appears to signal a new downward trend, making put options on the pair an appealing choice. Gold remains strong above $3,600, indicating that traders are still searching for protection despite the stock market rally. Given the high price, using call spreads is a cost-effective way to speculate on a continued rise toward the $3,700 level. This strategy also serves as a hedge in case simmering geopolitical tensions resurface. Create your live VT Markets account and start trading now.Hassett says Fed’s rate decision supports economic growth, but Miran’s analysis misses political factors
US Hassett, a Senior Adviser at the White House, said that the economy is growing without inflation. He did not know of any Nvidia deal like the one Intel made and mentioned that rare earths could create economic challenges.
European markets reacted well, with stock prices going up after the Fed’s decision, even as the Bank of England (BoE) kept rates at 4%. The BoE chose to maintain rates due to a persistent inflation rate of 3.8%. Future rate cuts are uncertain, and traders are focusing on UK economic reports.
Futures Rise on Fed’s Rate Cuts
Futures prices jumped at the news of possible Fed rate cuts, pushing the S&P 500 to target 6700. The VIX, which measures market volatility, fell by 6%. Intel’s stock surged in pre-market trading after news of its partnership with Nvidia to create a custom graphics chip. PENGU rose by 12% to $0.037, with a 67% chance of reaching $0.05, while NFT trading volume grew by 152%. A high-risk warning has been issued, highlighting the potential losses in foreign exchange trading. InvestingLive does not serve as an investment advisor and is paid by website advertisers based on user engagement. Readers should carefully reflect on the information provided and seek independent financial advice if needed.Expect a Continued Rally in Equities
With the Federal Reserve hinting at a rate cut, we should expect stocks to keep rallying. This shift will likely increase investor risk appetite, making long positions in S&P 500 call options or futures appealing in the coming weeks. A similar pattern occurred after the Fed’s pivot in late 2023, which triggered a rally that continued into 2024. The 6% drop in the VIX reflects a return to market complacency, which we should leverage. As volatility decreases, selling premium becomes a smart strategy. This could mean selling puts on indices or shorting VIX futures. With the VIX expected to stay below 14, this environment rewards those betting on continued stability. The difference in policies between a rate-cutting Fed and a steady Bank of England creates clear opportunities in the currency market. This situation favors going long on GBPUSD, as the interest rate gap is likely to widen in favor of the pound. Previously, the dollar’s rise in 2022 was supported by the Fed raising rates ahead of other central banks; we may now be witnessing this trend reversing. The situation with EURUSD is trickier, given the renewed threat of tariffs on EU goods. While a weaker dollar due to Fed cuts may help, political risks from Washington could push the euro lower. Buying volatility through straddles on EURUSD could be a good strategy, allowing us to profit from significant price movements in either direction. Intel (INTC) jumped 28% in pre-market trading due to the Nvidia deal, suggesting that its options will have very high implied volatility. Instead of chasing the stock, we should consider selling the inflated premium using strategies like covered calls or credit spreads. A similar volatility spike happened with Nvidia after its strong earnings report in May 2023, providing a clear example for this trade. Create your live VT Markets account and start trading now.After recent central bank decisions, attention turns to economic data influencing USDCAD stability and movement.
The USDCAD currency pair saw sharp movements after announcements from the Bank of Canada (BoC) and the Federal Reserve (Fed). Investors are now looking ahead to economic data that will influence future actions by the central banks.
Initially, the US dollar weakened but then recovered after the Fed’s strong comments. The Fed’s forecast includes two rate cuts in 2025, although officials are divided on this. Fed Chair Powell indicated these cuts would respond to concerns in the labor market, even as recent non-farm payroll reports were disappointing.
