Insights 
VT 
Dow Jones futures increased by 1.12%, trading above 46,200 during European hours on Monday. S&P 500 futures rose by 1.52% towards 6,700, while Nasdaq 100 futures surged 2.07% to approximately 24,900.
The rise in US index futures correlates with the anticipated likelihood of further rate cuts by the US Federal Reserve by the year-end. Markets predict a 96% chance of a 25-basis-point rate cut in October, with an 87% possibility of another cut in December.
US Consumer Confidence Report
US consumer confidence showed a slight decline in early October, corroborating expectations of a rate cut. The University of Michigan’s Consumer Sentiment Index fell slightly to 55.0, with the Current Conditions Index rising to 61.0 and Expectations Index falling to 51.2.
The market outlook improved amid reduced US-China trade tensions. President Trump, via Truth Social, remarked on China’s economy positively and mentioned no need to meet President Xi at an upcoming summit.
The prior session marked the Dow Jones falling 1.9%, the S&P 500 by 2.71%, and the Nasdaq by 3.56%, primarily due to losses in tech and chip stocks, including Nvidia, AMD, and Tesla.
With futures pointing to a strong rebound today, we see a classic clash between market sentiment and underlying economic data. The massive surge in Nasdaq futures, up over 2%, is a direct bet on the Federal Reserve cutting rates this month. After the market’s worst day since April 2025 in the last session, this rally shows how heavily traders are relying on cheaper money to fuel growth.
Fed Policy and Economic Indicators
The expectation for a Fed pivot is now almost completely priced in, with the CME FedWatch tool showing a 96% chance of a cut in October. This sentiment is supported by recent inflation data; the September 2025 Consumer Price Index (CPI) report showed a continued cooling trend, with headline inflation dropping to 2.8% year-over-year. This is a significant change from the aggressive rate-hiking cycle we saw back in 2022 and 2023, giving the Fed room to ease policy.
However, we must look at the weaker consumer confidence as a warning sign. While the sentiment reading of 55.0 was better than expected, it remains historically low, and initial jobless claims have been slowly creeping up over the past four weeks, recently hitting 235,000. This suggests the foundation of the economy is not as solid as the market rally implies, making this a potentially fragile recovery.
The tech sector is the main battlefield, as evidenced by the Nasdaq’s sharp fall in the previous session followed by its leadership in this pre-market rally. For traders, this signals extreme volatility, making options on indexes like the Nasdaq 100 attractive for capturing sharp, short-term moves. Given the recent sell-off, buying call options could play the immediate bounce, but holding some protective puts is a prudent hedge against another sentiment shift.
Finally, the conflicting messages on US-China relations create significant headline risk that can erase gains in an instant. The positive statement is completely undermined by the threat of 100% tariffs, a tactic we saw used frequently between 2018 and 2020. This uncertainty makes holding leveraged long positions overnight very risky, and traders should be prepared for sudden reversals based on geopolitical news.
