U.S. Markets Rally on Fed Rate Cut Expectations

U.S. equity markets surged Monday, delivering their strongest single-day performance since May. The NASDAQ jumped 2.0% to 21,053.58, the S&P 500 gained 1.5% to 6,329.94, and the Dow rose 1.3% to 44,173.64. Tech megacaps led the advance, with Nvidia, Microsoft, and Meta reaching new highs.

The rally followed last week's sharp selloff triggered by disappointing July employment data and downward revisions to prior months. While the weak jobs report heightened recession concerns, it also boosted expectations for Federal Reserve rate cuts. According to CME Group's FedWatch Tool, odds of a September quarter-point cut surged to 91.9% from 63.1% a week earlier.

Market volatility has been amplified by the new Trump administration's tariffs of 10%-41% on multiple trading partners, raising inflation and trade disruption fears. Monday's gains reflect investor hopes that imminent Fed easing will offset these headwinds.

Second-quarter earnings provided additional support, with over 80% of S&P 500 companies exceeding expectations. Technology and AI-focused firms delivered particularly robust results, reinforcing confidence despite economic uncertainty.

European markets followed the U.S. higher, with Germany's DAX climbing 1.4%, France's CAC 40 advancing 1.1%, and the U.K.'s FTSE 100 gaining 0.7%.

In Asia, Japan also saw significant economic developments. A Labour Ministry panel proposed a 6% hike in the national average minimum wage—the largest increase since the current system began in 2002. The proposal would raise the average salary to 1,118 yen (\$7.57) per hour, surpassing last year’s 5% rise, as the government pushes for wage-led growth.

The Nifty registered a relief rally yesterday, the first session of the week, rising 157 points (0.64%) to close at 24722. A clear sign of the market's improved sentiment was the widespread buying interest across sectors. Barring Nifty FMCG, which ended marginally in the red, all other sectoral indices closed the day in the green.

U.S. President Donald Trump announced plans on Monday to "substantially" raise tariffs on India, citing the country's continued purchases and sales of Russian oil amid the ongoing Ukraine conflict. In a post on Truth Social, Trump accused India of profiting from Russian crude while ignoring the humanitarian consequences of the war. However, he did not specify the timeline or scale of the proposed tariff hike.

Nifty has been consistently finding support at its 100-day DEMA, and yesterday's strong close has raised hopes for a pullback rally. The recent swing low of 24535 is now considered a support level, while the 50-day DEMA, located near 24900, is expected to offer resistance.

Indian markets are poised to open subdued on the back of Donald Trump’s threat to increase tariffs.