Markets Rally After Powell Hints at September Cut as Nvidia and Intel Drive Tech Focus
The U.S. market enters the next session coming off a broad risk-on move that reflects a clear recalibration of investor expectations about Federal Reserve policy and renewed attention on chipmakers and trade related developments. Federal Reserve Chair Jerome Powell signaled that a policy adjustment may be appropriate as soon as next month. Investors interpreted that comment as confirmation that a September interest rate cut is likely. Traders moved quickly to price the possibility, pushing the probability of a September cut above 83 percent according to CME FedWatch. At the same time expectations that policy will ease enough to trim rates by three quarters of a percentage point by year end rose sharply to 37 percent from 25 percent the session before. That faster reweighting of future policy has driven the immediate market reaction and will be a primary influence on trading in the coming sessions.
Equities responded in force. The S&P 500, Dow and Nasdaq all closed higher by more than 1.5 percent. The Russell 2000, representing smaller companies, was especially strong with a nearly 4 percent jump. The most significant rallies occurred in risk sensitive names and large cap technology stocks. The Magnificent Seven ETF rallied more than 2.4 percent as investors sought exposure to names that would benefit most from any easing of financial conditions. This risk-on sentiment extended to crypto where Bitcoin rose above $116,800. Fixed income markets digested the Fed comments by sending 10 year Treasury yields lower, down 7 basis points to 4.26 percent. Those moves reflect a market that is now more inclined to price policy easing in the months ahead and that will influence sector behavior, borrowing costs and valuation work for equity traders.
Heading into the next trading day, the interplay between interest rate expectations and earnings or corporate specific news will matter more than usual. If odds remain elevated for a September cut and yields stay lower, the multiple investors are willing to pay for longer duration growth will likely stay supported. That helps large technology names and growth sectors that have driven the recent rally. Conversely, financials and other rate sensitive sectors could trade under pressure if yields remain suppressed. For traders who want to position ahead of tomorrow, volatility in rates and delta in Fed expectations are the two themes to watch.
On the corporate front, several items deserve attention and could drive sector rotation or headline risk. Intel jumped strongly in reaction to a political development. The chipmaker rallied 5.5 percent after President Trump told reporters that Intel agreed to sell roughly a 10 percent equity stake to the U.S. government. That is an unusual arrangement that will attract close scrutiny from investors evaluating government involvement in a key domestic producer of semiconductors. The potential for a government stake changes the calculus for Intel shareholders and could influence related supply chain names as market participants parse whether this stabilizes capital plans or alters competitive dynamics.
Nvidia also remains a focal point for the market because of geopolitically sensitive technology flows. The company is reported to be developing a new AI chip intended for China while it works to resolve a contentious situation around the H20 GPU. Beijing had reportedly advised companies not to buy the modified H20 over security concerns and complained about its downgraded specifications. Production of the H20 has been halted while Nvidia seeks to reassure Chinese regulators. At the same time Nvidia recently obtained permission from the White House to resume some AI chip sales to China under an arrangement that routes 15 percent of those sales to the U.S. government. Any new China-focused product will require additional sign-off from U.S. authorities. These developments create an environment where chipmakers and cloud providers could face abrupt swings in approval risks and sales guidance. Traders will be watching announcements closely for signs of resolution or further regulatory friction.
Outside of the semiconductor space there are other items that could affect pockets of the market. Canada said it would drop a 25 percent retaliatory tariff on U.S. goods shipped in compliance with the North American trade deal. The removal is limited in scope because existing 25 percent duties on U.S. steel, aluminum and automobiles will remain in place. While the tariff rollback is narrow, it reduces one geopolitical line of uncertainty in North American trade and could be welcomed by specific supply chain participants or exporters.
Corporate activity is also gaining attention with Netskope filing for an initial public offering. The cybersecurity and cloud security provider joins a wave of tech companies preparing to go public after the Labor Day holiday. That IPO pipeline could affect reception for other software and security names, particularly those competing for investor attention in cloud related themes.
On a lighter but legally consequential note, two major U.S. airlines are facing lawsuits over the sale of window seats that do not have actual windows. Plaintiffs accuse carriers of selling rare window seats that sit next to blank walls on certain Boeing and Airbus models and are seeking class action status. While this matter is unlikely to move broad markets it is a reminder that consumer class actions can produce headline risk, especially for travel and leisure firms that rely on ticketing and ancillaries for revenue.
For the coming trading session, watch three inputs closely. First, implied Fed policy odds and where market priced expectations settle early in the session. Continued decline in yields will support growth and risk assets. Second, tech and chip headlines will remain a major driver of intraday flows. Any fresh updates from Nvidia or confirmation around Intel ownership details could trigger outsized moves. Third, positioning in small caps and the Magnificent Seven will reveal whether the rally is broad based or concentrated in a handful of names. A sustained broadening of the rally would suggest greater confidence in a shift toward easier policy. A narrow advance would leave the market vulnerable to rotation if headlines disappoint.
Traders and investors should enter the next session mindful that the Fed comments have increased the probability of near term easing. At the same time the path beyond a single cut is uncertain. Market moves so far reflect a strong willingness to price that near term cut into assets. The question for the days ahead is whether economic data and corporate news will confirm that view. If they do, the current momentum has room to continue. If not, expect some of the more speculative elements of the rally to retrace quickly. For now the opening tone will be colored by cheaper borrowing expectations, stronger appetites for growth stocks and heightened sensitivity to technology and trade headlines.
Have a disciplined plan and a focus on risk management as the market sorts through these developments. The next session promises active trading driven by macro commentary and headline driven corporate moves that will shape where the market goes next.
