Markets extended their rebound on Tuesday, with optimism growing that the Federal Reserve will deliver its third and final rate cut of 2025 in December. The Dow Jones Industrial Average rose 1.2%, the S&P 500 gained 0.7%, and the Nasdaq climbed 0.4%, though weakness in tech limited broader gains.

Macro & Fed Watch

Recent data pointed to a cooling economy and easing inflation, with September retail sales growth undershooting expectations and producer prices rising modestly. The trend supports expectations that the Fed could cut rates by 25 basis points next month.

Markets are now pricing in an 84.7% chance of a December rate cut, up sharply from about 50% a week earlier. Dovish remarks from New York Fed President John Williams and Fed Governor Christopher Waller reinforced this shift, signaling policymakers are open to policy easing as inflation pressures moderate and consumer spending slows.

More about: Wall Street Advances as Fed Rate Cut Bets Gather Momentum

However, some economists warn that expectations of multiple cuts may be overblown, noting that the Fed could pause after December if inflation proves sticky.

Markets & Commodities

Bond yields fell, with the 10-year Treasury yield moving near 4%, reflecting growing rate-cut optimism. The dollar weakened against major currencies, while gold advanced on lower-rate expectations.

Equities rallied broadly, led by the blue-chip Dow, which outperformed as investors rotated into cyclical sectors. The Nasdaq lagged as weakness among AI and semiconductor stocks weighed on performance.

Corporate & Market Movers

  • Nvidia fell 3.9% amid renewed fears of competition in AI semiconductors after reports that Google is developing its own chips.
  • Alphabet rose 1.3%, extending its rally toward a $4 trillion valuation, following reports that Meta Platforms plans to use Google’s AI chips in data centers from 2027 and rent chips from Google Cloud as early as next year.
  • Retail stocks surged, with Kohl’s (+34.6%) and Abercrombie & Fitch (+35%) both hiking their annual profit forecasts.
  • Burlington Stores dropped 11.5% after disappointing quarterly revenue results.
  • Alibaba slipped 2.1% despite stronger-than-expected earnings, and Coinbase and MicroStrategy fell 3.4% and 5.2%, respectively, following weakness in Bitcoin, which slipped toward $87,000.

Sector & Industry Watch

Healthcare led gains among S&P 500 sectors, while utilities lagged.
Retail stocks outperformed, with the S&P 500 Retail Index jumping 2.2% on upbeat holiday sales guidance.
Tech remains under pressure, reflecting rising competition in AI chips and concerns over stretched valuations.

Economic Calendar — What’s Next

Investors are now awaiting the Federal Reserve’s December policy meeting, the last of the year. Upcoming labor and inflation data will be crucial in shaping the Fed’s decision and setting the tone for early 2026.


Investor sentiment has improved sharply as rate-cut bets rise and inflation cools. Yet, tech weakness and consumer caution could still limit near-term upside. The Fed’s December decision now stands as the key catalyst for markets heading into year-end.

Related: 5 Things to Watch in Markets This Week

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