Fed Rate Cut Optimism Drives US Markets to New Peaks

Indian markets are poised to open flat in line with subdued global cues. 

Wall Street rallied Thursday following an upward revision to second-quarter GDP data and growing speculation about a September Fed rate cut. The S&P 500 surpassed 6,500 while the Dow Jones hit all-time highs, driven by positive economic indicators and strong Q2 earnings results. Optimism around potential rate cuts and robust consumer spending supported market sentiment. 

Friday’s release of the PCE price index for July will be closely watched, with headline inflation expected to hold steady at 2.6%. However, core PCE—the Fed’s preferred inflation measure—is projected to rise to 2.9% year-over-year from July’s 2.8%, marking a five-month high and remaining well above the Fed’s 2% target.  

With core PCE inflation potentially hitting 2.9% amid Fed officials signalling a September cut, market expectations for easing have intensified, keeping the CBOE Volatility Index subdued while leaving investors vulnerable to inflation surprises. 

Nvidia exceeded earnings expectations but disappointed on data centre revenue, causing shares to decline and triggering volatility across AI-related stocks. 

Investors focused on future demand outlook and guidance, particularly as China sales restrictions clouded prospects. CrowdStrike dropped nearly 3% on weak Q3 revenue guidance, while Snowflake surged 12% after delivering strong quarterly results. Dell raised annual forecasts amid surging demand for AI-optimised servers powered by Nvidia chips. 

Wall Street now awaits the July PCE reading—the Fed’s preferred inflation gauge—scheduled for Friday, which could provide fresh insights into the likelihood of a September rate cut. 

U.S. stock index futures dipped slightly on Thursday evening as markets steadied after the S&P 500 reached record highs, with investors awaiting crucial inflation data that could influence the Federal Reserve’s interest rate decisions. 

Oil prices declined toward $64 per barrel amid concerns over supply oversupply and weakening global demand, positioning U.S. crude for a monthly loss. Delayed regulatory policies in California, along with shifting trade dynamics, further pressured prices. 

India’s industrial production surged to a 4-month high of 3.5% in July 2025, primarily driven by strong growth in the manufacturing sector, which expanded by 5.4% year-on-year. 

Investor interest in Reliance Industries’ 48th AGM today remains strong, with high anticipation as usual.  

Yesterday marked another bearish session on Dalal Street despite strong global cues, with the Nifty plunging 0.85%, or 211 points, to close at 24,500. Over the last five trading sessions, the Nifty has declined by 672 points from its peak of 25,153. 

The volatile August series ended with Nifty down 1% and Bank Nifty plunging 3.83% for their second consecutive monthly losses, while September begins with FIIs holding an extremely bearish 0.09 long-to-short ratio (92% short positions)—the lowest since March 2023—though oversold conditions and aggressive put writing at 24,000-24,500 levels suggest limited downside and potential for a pullback rally. 

Immediate Supports for the Nifty are now seen at 24337 and 24266, where the previous swing low and 200 DEMA are placed, respectively. On the upside, 24,700 is expected to offer resistance for the Nifty. 

Source: HDFC Securities Prime Daily, 29 August 2025 

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