U.S. stocks experienced a notable rally on Tuesday, marking a significant rebound influenced by increasing optimism regarding a potential interest rate cut by the Federal Reserve next month. Major market indices reflected this momentum, with the Dow Jones Industrial Average surging over 1.4%—more than 600 points—while the S&P 500 climbed 0.9%. The tech-heavy Nasdaq Composite, despite a rocky start, managed a 0.7% gain, building on a strong performance from the previous session.
The stock market’s upswing was particularly driven by tech giants, with Alphabet and Apple reaching record highs. Alphabet’s shares continued their remarkable ascent, nudging closer to a $4 trillion market capitalization, triggered by positive investor sentiment around its advancements in artificial intelligence. Meanwhile, Apple’s stock also recorded gains, underscoring a robust confidence in the tech sector.
However, not all tech stocks fared well. Nvidia faced downturns after a report suggested that Meta is negotiating with Google to invest billions in the tech giant’s artificial intelligence chips, a move that could challenge Nvidia’s dominance in the industry. This news contributed to a more than 3% decline in Nvidia’s share price.
Investors are closely monitoring the Federal Reserve’s stance, especially in light of recent economic data that suggest a slowing labor market and consumer spending. The latest market assessments indicate an over 80% probability that the Fed will implement a quarter-point rate cut in December, a sentiment reinforced by comments from Fed governor Chris Waller that align with other policymakers advocating for eased monetary conditions.
In economic data released Tuesday, retail sales figures for September showed a moderate increase, up 0.2%, but falling short of economists’ expectations of a 0.4% rise. Meanwhile, wholesale prices also inched up by 0.3%, signaling inflation dynamics that could influence the Fed’s decision-making process.
On the earnings front, retailers Kohl’s and Best Buy reported better-than-expected results, with both firms raising their full-year outlooks. Best Buy’s performance was attributed to strong sales across various electronics categories as it heads into the busy holiday shopping season.
Additionally, the small-cap Russell 2000 index gained more than 2.2%, showcasing investor optimism about potential rate cuts, which are considered particularly beneficial for smaller companies burdened with debt. The Russell 2000 has risen over 10% year-to-date, although it’s still trailing behind the larger S&P 500 and Nasdaq which have seen increases of 14% and 18%, respectively.
As the trading week progresses, market participants are gearing up for the Thanksgiving holiday, with U.S. markets scheduled to close on Thursday and operate on a reduced schedule on Friday, ending at 1 p.m. ET. The backdrop of hopeful comments from Fed officials regarding monetary policy, coupled with a noticeable shift in tech stock performance, establishes a cautiously optimistic environment as investors anticipate further developments.
