After a sharp downturn, the market quickly rebounded, with the S&P up 4% and the NASDAQ climbing as well. A key driver of this bounce was the semiconductor sector, particularly companies like Nvidia, benefiting from the artificial intelligence (AI) boom. Cryptocurrencies also had a stellar week, surging 13%, while gold climbed steadily, positioning itself as a reliable hedge.

Key Events Impacting the Market

Several critical events shaped the week:

• FOMC Meeting (September 18th): The Federal Reserve is caught between a 50/50 decision to cut rates by either 25 or 50 basis points. Inflation has been trending down, but unemployment has risen, leaving the Fed in a difficult position as it tries to balance the two. Additionally, with the upcoming U.S. elections, the Fed faces pressure to remain as independent as possible.

– Tech Sector Revival: AI-driven optimism propelled stocks, with semiconductor giants like Nvidia up 10% on the week. Conferences from Oracle and other tech firms fueled this momentum by highlighting long-term investments in AI and capital expenditures. This rise in tech was supported by

strong projections for AI growth over the next five years.

Asset Performance: Winners & Losers

• Semiconductors: The standout performer, led by Nvidia, saw a rise of more than 10%, signaling renewed strength in tech.
• Energy & Financials: Energy stocks remained flat, while banks like JPMorgan faced lower earnings projections for 2025 due to falling yields. JPMorgan stock dropped 6-7%.
• Gold & Cryptos: Gold emerged as a safe haven, driven by expectations of a Fed rate cut, while cryptos saw triple-digit gains.
• WTI Crude Oil: WTI crude bounced back to $67 after dropping to $65 earlier in the week.

Fed’s Rate Cut Decision: 50/50 Odds

The upcoming FOMC meeting holds the key to the Fed’s rate-cutting strategy, with market odds split between a 25 or 50 basis point cut. The pace at which the Fed cuts rates will be crucial, as the market currently expects a 1.1% cut before year-end. This translates to four to five rate cuts over just three meetings, indicating aggressive monetary easing.

Sector Focus: A Deeper Look at the AI Push

Tech stocks, led by semiconductors, are on the rise. Nvidia and Oracle’s bullish forecasts on AI investment drove much of the week’s gains. Oracle’s earnings call suggested long-term growth prospects for AI and CapEx, while Nvidia’s stock shot up due to strong demand for its AI products.

NVDA (lhs) vs Nasdaq Composite (rhs).

Macro & Global Events to Watch

• Retail Sales & Housing Data: U.S. retail sales will be closely watched as a key indicator of consumer health. Similarly, housing numbers, such as building permits, will shed light on the state of the real estate market.
• Chinese Economic Data: Disappointing retail sales and industrial production figures from China suggest an ongoing slowdown in the region, although potential policy interventions from the Chinese government could provide a lifeline.

Looking Ahead: Key Catalysts for the Week

• FOMC Meeting: The primary focus will be on how quickly the Fed plans to cut rates and whether they opt for a 25 or 50 basis point reduction.

S&P 500 FOMC day recent performances.

VIX & Options Expiry: Volatility is expected with VIX expiry on Wednesday and options expiry on Friday. Watch for significant movements as market positions unwind, especially with index rebalancing and companies like Palantir joining the S&P 500.

• VIX September OI.

Conclusion

The market is on the verge of hitting new all-time highs, but caution is advised as seasonality suggests a potential pullback in late September or early October. As always, keeping an eye on market trends, tech performance, and macroeconomic data will be crucial for the coming weeks.

For more detailed insights and strategies, join our trading community on Discord or check out our 4×4 Video Series: https://discord.gg/NedmqPVf

Have a great trading week ahead!

Greg Dupont

greg@duponttrading.com

https://substack.com/@gregoiredupont