By JJ Kinahan,Kent Nishimura,Senior Contributor

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The Fed is expected to cut interest rates by a quarter point later today. (Photo by Kent Nishimura/Getty Images)
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Key Takeaways

Fed Decision And Projections Will Drive Market Volatility This Week

China Blocks Nvidia AI Chips, Boosting Domestic Tech Sector Confidence

TikTok Ownership Deal Could Lead To Landmark Future U.S. IPO

Broad market indices closed lower on Tuesday as investors await a decision from the Federal Reserve on interest rates later today. While the rate cut is a foregone conclusion, there does remain some talk that the Fed may go more aggressively than most anticipate. The decision will be announced today at 1PM CT.

While markets await a decision from the Federal Reserve Open Market Committee (FOMC), it will have some other news to digest in the interim. Yesterday, Chinese officials told companies to no longer purchase Artificial Intelligence (AI) chips from Nvidia. Instead, China wants to focus its attention on creating its own AI chips. That news sent the Hang Seng Tech Index higher by over 4%, its highest close since November of 2021. Individual Chinese tech stocks are seeing a boost this morning. Shares of Baidu are higher by nearly 10% in premarket.

In other related news, President Trump stayed the execution of TikTok again. As a part of the deal being negotiated, U.S. companies would take an 80% ownership in the company. Oracle, Silver Lake and Andreesen Horowitz would all be investors. While details remain to be worked out, the U.S. version of the TikTok app would go by a different name. ByteDance, the current owner of TikTok, would license the content recommendation algorithm to the U.S. companies. One of the more interesting aspects of this deal is if U.S. companies own the new platform, they could potentially take it public in what would surely be one of the biggest IPOs to date.

Speaking of IPOs, in what’s been a flurry of recent activity, we have one more company debuting today. Ticket broker StubHub priced its IPO last night at $23.50 per share, in the middle of its expected range. The offering gives the company a valuation of $8.6 billion and will raise around $800 million. Shares will trade under the symbol, STUB.

Today is ultimately going to be about waiting on not just the decision of the Fed, but also the rate projections which will be released. Markets are anticipating a total of three rate cuts before the end of the year, therefore, the post meeting press conference will be at least as important, if not more so than today’s rate decision.

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The other development to keep an eye on will be positioning ahead of Friday’s triple witching expiration. As I’ve mentioned this week, this is a quarterly expiration where listed options, futures options and futures all expire. I would expect following the Fed decision and projections for the rest of the year that we’ll begin seeing traders reposition for the remainder of the year. Already, we’re seeing a slight uptick in volatility in premarket activity which I believe is at least partially attributable to expiration, in addition to today’s FOMC announcement. In other words, I am not expecting volatility to necessarily come down following the Fed decision.

For today, I’m most interested in what the Fed has to say with respect to future interest rate cuts and how the market digests those projections. Generally speaking, interest rate cuts are a positive for the market and can provide a catalyst for higher prices. However, given some uncertainty around what the Fed will actually do for the remainder of the year, today’s decision combined with Friday’s expiration could make for volatile trading. As always, I would stick with your investing plans and long-term objectives.

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