Traders Bet on September Rate Cut Amid Tech Stocks Slump

As of August 1, 2025, traders have reversed their expectations and are now placing a higher probability on the Federal Reserve cutting interest rates in September. This potential rate cut could be a silver lining for the struggling megacap tech stocks, which saw a decline on Friday.

The group of tech giants, known as the "Magnificent 7," which includes companies like Amazon, Nvidia, Microsoft, and Apple, fell in line with the broader market. The drop came after a week of generally strong earnings results was interrupted by the Trump administration's latest tariff plan and a weaker-than-expected jobs report.

Investors were particularly harsh on Amazon, whose shares fell more than 7% on Friday, as its results were seen as less impressive compared to peers like Microsoft. However, the rest of the cohort, including Nvidia, Apple, and Alphabet, held up better, declining roughly in line with the market.

The new tariff plan, set to take effect on August 7, 2025, is expected to apply a broad 10% rate to countries with a trade surplus with the U.S. and a 15% rate to those with a trade deficit. This move is likely to raise inflation and growth concerns. Meanwhile, the July jobs report showed a slowdown in U.S. job growth, and the Labor Department also revised down the numbers for May and June.

The weaker economic data has increased the odds of the Federal Open Market Committee cutting rates in September, which could benefit growth-oriented companies like those in the tech sector. Traders now see a near-80% probability that the central bank will trim the Fed funds rate by a quarter percentage point next month, up from less than 40% the day before.