Dovish Fed Expectations Fuel Risk Asset Rally

U.S. equities surged to record highs, with the S&P 500 and Nasdaq leading broad-based gains as weak employment data reinforced expectations for a September Federal Reserve rate cut. Technology and consumer discretionary sectors drove the rally, with homebuilders and retail stocks showing particular strength.  

Broadcom exceeded quarterly expectations and issued optimistic guidance, reinforcing its dominance in AI infrastructure.  

Private sector hiring decelerated sharply according to ADP data, while initial jobless claims rose to 237,000—an 8,000 increase from the prior week and above the 230,000 economist consensus. This marked the highest level since June, fueling speculation of imminent monetary easing with traders now pricing a 97% probability of a September rate cut.  

The Friday jobs report will provide crucial confirmation, with economists forecasting 75,000 new positions in August and unemployment edging higher to 4.3%.  

Crude oil declined another 0.5% amid concerns over potential OPEC+ output increases and softer inventory data.  

Gold maintained its position near all-time highs as investors sought policy and inflation hedges, while the dollar weakened against major currencies ahead of the anticipated Fed decision.  

The Nifty opened with a robust 265-point gap but immediately encountered profit-taking at elevated levels, surrendering 272 points from its intraday peak before closing marginally higher by 19 points at 24,734. The index settled precisely at its 20- day DEMA, with strong support at the 24,500 level. For bullish confirmation, the Nifty requires a decisive close above 24,800 resistance.  

Yesterday’s price action exemplified a classic “buy the rumour, sell the news” behaviour from traders. With the initial reaction now absorbed, we anticipate institutional investors will likely re-enter the market today after digesting the developments.  

Indian markets are poised to open higher, supported by buoyant global cues and expectations of lower U.S. rates, which are expected to boost global risk assets. Additionally, positive sentiment from the GST rate cuts is likely to provide further momentum. 

Source: HDFC Securities Prime Daily, 5 Sept 2025 

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