[New York Stock Exchange] September Rate Cut Hopes, U.S.-China Talks Progress Push S&P and Nasdaq to Record Highs... Alphabet Hits $3 Trillion Market Cap

96% Probability of 0.25 Percentage Point Rate Cut at FOMC on the 17th
Trump's "U.S.-China Trade Talks Progressing Smoothly" Remarks Also Boost Investor Sentiment
Alphabet Joins $3 Trillion Market Cap Club; Tesla Recovers Year-to-Date Losses

All three major indices on the New York Stock Exchange closed higher on September 15 (local time). Investor sentiment was supported by expectations that the Federal Open Market Committee (FOMC) would resume interest rate cuts this week, while positive remarks from U.S. President Donald Trump regarding progress in U.S.-China trade negotiations also acted as a catalyst. Alphabet, the parent company of Google, joined the $3 trillion market capitalization club, fueled by the artificial intelligence (AI) boom.

On this day, the Dow Jones Industrial Average, which is centered on blue-chip stocks, closed at 45,883.45, up 49.23 points (0.11%) from the previous trading day. The S&P 500 Index, which focuses on large-cap stocks, rose 30.99 points (0.47%) to 6,615.28, while the tech-heavy Nasdaq Index jumped 207.647 points (0.94%) to 22,348.749. All three indices closed at record highs.

By stock, Alphabet, the parent company of Google, surged 4.3%, surpassing a $3 trillion market capitalization for the first time. Optimism over AI, along with a court ruling earlier this month that Google does not need to divest its Chrome browser, drove the stock higher. With this, Alphabet became the fourth company to surpass a $3 trillion market cap, following Nvidia, Microsoft, and Apple. Tesla rose 3.62%, fully recovering all of its cumulative losses for the year, after news broke that CEO Elon Musk had purchased $1 billion worth of company shares. This is the first public share buyback by Musk since 2020 and is the largest ever. Oracle, considered a potential acquirer, climbed 3.43% on news that the U.S. and China had agreed to sell the U.S. operations of the Chinese video-sharing platform TikTok. In contrast, Nvidia ended slightly lower by 0.04% after Chinese regulators announced they would continue their antitrust investigation into the company.

News of progress in U.S.-China trade negotiations boosted investor sentiment. President Trump stated on his self-created social networking service, Truth Social, "The large-scale trade meeting between the United States and China held in Europe went very smoothly," and added, "Negotiations related to a 'specific' company that our country's young people desperately want have also been concluded. They will be very pleased." He continued, "On Friday (the 19th), I will have a phone call with President Xi (Xi Jinping, President of China)," emphasizing, "The relationship between the two countries remains very strong."

The 'specific company' mentioned by President Trump refers to TikTok. Under the so-called 'TikTok Ban Act' passed by the U.S. Congress in April last year, Chinese parent company ByteDance faced the risk of having its U.S. operations suspended unless it sold them, but an agreement to sell was reached during these negotiations.

The two countries held the fourth high-level trade talks in Madrid, Spain, starting the previous day, and concluded negotiations on this day. The United States also left open the possibility of extending the 'tariff truce.' Currently, both countries have reduced their tariff rates by 115 percentage points each, with the U.S. applying a 30% tariff and China a 10% tariff on each other's goods. This measure will remain in effect until November 10. Representative Greer stated, "If the talks continue in a positive direction, we are certainly willing to consider additional measures."

The main focus for investors is the September FOMC regular meeting, scheduled for September 16-17. Recent weak employment data has increased the likelihood of an interest rate cut, and the market is reflecting a 96% probability that the Federal Reserve will lower the current benchmark rate of 4.25-4.5% by 0.25 percentage points. In contrast, the probability of the 'big cut' (a 0.5 percentage point rate cut) that President Trump has called for two days in a row stands at only 4.0%. The probability of a total 0.75 percentage point cut by the end of the year is 71%.

Expectations are rising that if interest rate cuts resume, the stock market rally will continue, bolstered by the AI boom.

However, some analysts point out that attention should be paid to Federal Reserve Chair Jerome Powell's remarks on the future path of interest rates during his press conference. The dot plot, which can provide clues about future rate levels, is also a key point to watch.

Thierry Wizman, global foreign exchange and interest rate strategist at Macquarie Group, predicted, "Chair Powell will present a balanced stance," adding, "He will once again emphasize downside risks to employment, but is unlikely to suggest a series of rate cuts after September."

Chris Larkin, managing director at Morgan Stanley E*Trade, said, "The discussion will now focus on how aggressively the Fed will act," and added, "The market could receive short-term signals from Chair Powell's press conference." He also noted, "While the Fed is currently focused on jobs, it may remind us that it has not forgotten the other half of its mandate-price stability."

Major economic indicators are also scheduled for release this week. On September 16, August retail sales data will be released, and on September 18, the weekly number of new unemployment claims will be announced.

Yields on U.S. Treasury bonds were slightly lower. The yield on the benchmark 10-year U.S. Treasury note fell by 2 basis points (1bp = 0.01 percentage point) from the previous day to 4.03%, while the yield on the 2-year U.S. Treasury note, which is sensitive to monetary policy, dropped by 1 basis point to 3.53%.