Markets Steady Ahead of Fed Decision as Trade Deals and Earnings Drive Sentiment

Image Source : Krish Capital Pty Ltd

Index Update:  On Monday, the S&P 500 and Nasdaq hit new record highs, rising 0.02% and 0.33%, while the Dow dipped 0.14%. Markets responded to a new US-EU trade deal with a 15% tariff baseline and growing hopes for a US-China truce extension. Investors are focused on upcoming earnings from major tech firms and the Federal Reserve’s policy decision, with speculation about a potential September rate cut. Key data on PCE inflation and July jobs are also expected later this week.

Market Movers:  On Monday, the top gainers were CEA Industries Inc.(+548.85%), followed by VisionWave Holdings, Inc. (+368.09%). On the contrary Mega Fortune Company Limited (-31.53%) and LM Funding America, Inc (-30.58%) declined the most the same day.

Commodities Update:  Oil prices climbed on Tuesday, with WTI nearing $67 and Brent around $70.3 per barrel, extending Monday’s 2% gains. The rally is driven by rising geopolitical tensions, as President Trump shortened Russia’s deadline to reach a Ukraine ceasefire to 10–12 days, threatening secondary sanctions. This coincides with new EU sanctions targeting Russian oil and banking, along with a ban on a major Indian refinery. Additionally, a new US-EU trade deal setting a 15% tariff on most European goods, along with recent deals with Japan, have eased fears of a slowdown in global economic growth and energy demand.

Gold prices inched up to around $3,320 per ounce but stayed near a three-week low, pressured by easing trade tensions and a stronger dollar. Investors are watching US-China talks closely, with hopes for a 90-day extension on tariff pauses. Attention also turns to the Federal Reserve meeting this week, where rates are expected to remain unchanged, though markets anticipate a potential cut in September. Key economic data, including the PCE index and nonfarm payrolls, are also on the radar.

Macro Update:  President Trump announced the resumption of trade talks with Cambodia and Thailand after both countries agreed to a ceasefire following five days of border clashes that displaced over 150,000 people. The truce, brokered during talks in Malaysia, came after Trump warned of 36% tariffs if violence persisted. He credited the peace deal with saving thousands of lives and confirmed direct talks with both nations' leaders.

Bonds Commentary:  The 10-year US Treasury yield held steady around 4.4% for a fourth straight session as investors awaited the Fed’s policy decision, where rates are expected to remain unchanged. Markets are looking for clues about a possible September rate cut, with attention also on the upcoming PCE inflation data and key labor market reports. Meanwhile, trade developments remained in focus after a new US-EU deal imposed a 15% tariff on most EU exports, seen as benefiting the US economy.

Dollar Commentary:  The US dollar index remained strong above 98.6 on Tuesday, bolstered by euro weakness after a US-EU trade deal perceived as favoring the US. The 15% tariff on EU goods drew criticism from European leaders, with concerns over economic harm, particularly in Germany. President Trump warned of higher tariffs for non-compliant countries. Markets now await the Fed’s policy decision, expected to hold rates steady, and are watching for signals of a possible September cut alongside key economic data, including PCE inflation and jobs figures.

Futures Update:  U.S. equity futures edged higher on Tuesday, with the S&P 500 and Nasdaq up 0.1% and 0.2% respectively, as Wall Street anticipates a pivotal week. The S&P 500 marked its 15th record close of 2025, gaining 3% month-to-date. Despite mixed index moves—Nasdaq rising and Dow slipping—investors appear to favor growth stocks. Market optimism is fueled by a lower-than-expected 15% tariff in Trump’s trade deal with the EU, raising hopes for similar agreements with China or others ahead of the August 1 deadline.

After initially climbing higher during the session, stocks largely traded sideways and showed lackluster performance throughout Monday. The S&P 500 edged up by 1.11 points, or 0.02%, closing at 6,389.76. From a technical perspective, following a period of consolidation, prices are beginning to trend upward, indicating the possibility of further gains. The 14-period Relative Strength Index (RSI) remains in overbought territory, but unless a divergence occurs that triggers a reversal, the upward momentum could persist. Nonetheless, key moving averages are still significantly below current levels, providing support should volatility pick up. Critical support levels are around 6,320, with resistance anticipated near 6,466.