The NASDAQ index led the US stock gains with a rise of 0.93%, closing at a new record level. The S&P index also reached a record high, increasing by approximately 0.50%.
Tesla shares saw a notable increase of 3.62%, while Alphabet’s market capitalisation exceeded $3 trillion, up by 4.53%. Despite this, Nvidia shares remained unchanged after China raised concerns about compliance with anti-monopoly laws.
Market Closing Figures
The Dow Jones Industrial Average increased by 49.23 points, or 0.11%, closing at 45,883.45. The S&P 500 rose 30.99 points, or 0.47%, reaching 6,615.28, and the NASDAQ gained 207.65 points, or 0.94%, closing at 22,348.75.
The Russell 2000 index of small-cap stocks advanced by 8.069 points, or 0.34%, closing at 2,405.13. Telecommunication services led sector advances with a gain of 2.34%, contrasting with declines in healthcare and consumer staples of over 1%.
In the S&P 500 components, five sectors rose, including consumer discretionary and information technology. Meanwhile, six sectors, such as energy, real estate, and materials, experienced declines.
With the market pricing in a rate cut this Wednesday, we should be cautious of a “sell the news” event. Fed funds futures indicate an over 85% probability of a 25-basis point cut, so a hawkish tone from the Fed could quickly reverse these record highs. The key is to watch the statement for hints about future cuts this year.
Technology and Market Risks
The NASDAQ’s strength, pushing the index to another record, makes technology the clear momentum play. However, with the VIX hovering near a low of 13, options are relatively cheap, making it a good time to consider protective puts on broad indexes like the SPX or QQQ. This offers a cost-effective hedge against any post-FOMC disappointment.
Alphabet joining the $3 trillion club shows that mega-cap concentration is driving this rally. We can use derivatives to isolate this theme, perhaps through call spreads on individual tech giants to profit from further upside while limiting risk. The mixed performance, with six of eleven S&P sectors falling today, confirms this is a narrow advance, not a broad market surge.
This situation feels similar to the market action we saw in early 2024, when the indexes rallied hard on the promise of rate cuts that were repeatedly delayed. That history suggests that the initial reaction to the first cut can be volatile once the certainty is gone. The August 2025 CPI reading of 2.8% gives the Fed cover to cut, but their forward guidance is now everything.
The stark rotation out of defensive sectors like Healthcare and Consumer Staples is a major signal. We should consider strategies that take advantage of this divergence, such as pairs trades involving buying calls on discretionary ETFs while simultaneously buying puts on staples. This allows us to trade the underlying trend without taking on as much broad market directional risk.
