Nasdaq Composite Live: Interest Rate Cut Odds Now up to 97.8%

After a few days of massive gains, Nasdaq futures are flat.

The benchmark saw fresh new highs after the release of cooler-than-expected inflation data for July. That only strengthened hopes for a potentially aggressive interest rate cut from the Federal Reserve at its September meeting.

“After yesterday’s ‘not as bad as it could have been’ July Consumer Price Index report, the equity markets are now in full ‘easing expectation’ mode,” said CFRA Research’s chief investment strategist Sam Stovall, as quoted by CNBC. “Even though Thursday’s Producer Price Index (PPI) is projected to show increases on a month-over-month (M/M) and year-over-year (Y/Y) basis, we think investors will overlook them.”

Fueling more momentum, U.S. Treasury Secretary Scott Bessent believes the Federal Reserve will cut interest rates by half a point at its September meeting. As he told Bloomberg, “I think we could go into a series of rate cuts here, starting with a 50-basis point rate cut in September. If you look at any model (it suggests that) we should probably be 150, 175 basis points lower.”

At the moment, the odds we’ll see a sizable rate cut are now up to 93.3%, according to the CME FedWatch tool, which you can see here.

UBS analysts say investors should hedge for volatility

With the Volatility Index now back to 14.6, markets should be mindful of the potential for volatility spikes, according to UBS, as also noted by CNBC.

“While the VIX index of implied stock volatility has fallen to the lowest level since December last year, market swings could pick up quickly if trade tensions escalate significantly, economic data weakens faster than expected, or if geopolitical risks worsen,” they added.

Some ways to hedge for potential volatility are with ETFs and ETNs, such as:

• ProShares Ultra VIX Short-Term Futures ETF (UVXY): The ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index. The last time volatility exploded higher,
• iPath S&P 500 VIX Short-Term Futures (VXX): The VXX ETN which provides exposure to the S&P 500 VIX Short-Term Futures Index.
• ProShares VIX Short-Term Futures ETF (VIXY): ProShares VIX Short-Term Futures ETF provides long exposure to the S&P 500 VIX Short-Term Futures Index, which measures the returns of a portfolio of monthly VIX futures contracts with a weighted average of one month to expiration.