The market seems to be in a holding pattern after Wednesday’s strong tech-led rally, which was driven by the August inflation data. The big gains in semiconductor stocks like Nvidia and AMD, as well as other megacap tech names like Apple and Amazon, reflect investor optimism that the Fed is likely to opt for a more moderate 25 basis point rate cut at next week’s meeting. While headline inflation has eased, the uptick in core inflation has tempered expectations for a larger 50 basis point cut, which now seems unlikely.

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The political landscape is also playing a role, with the recent presidential debate boosting solar stocks and pressuring crypto firms, possibly due to differing regulatory or fiscal outlooks between the candidates. The dollar’s strength indicates that traders are still leaning toward safe-haven assets amid economic and political uncertainty, while the slight rebound in 10-year Treasury yields shows a stabilization in bond markets as investors digest the latest inflation data.

As the focus now shifts to the producer inflation data, the market will be looking for further clarity on inflationary pressures, which could offer more insights into the Fed’s decision-making process. Overall, the market appears cautiously optimistic, with the expectation that the Fed will proceed with a smaller rate cut while keeping an eye on inflation trends and economic stability.

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