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Wall Street indices surged on Monday, extending gains from the previous session. The rally was fueled by increasing investor confidence that the US Federal Reserve is poised to deliver an interest rate cut in December, helping markets look past lingering concerns about the high valuations of technology companies.
The US market kicked off the holiday-shortened week with strong advances, driven primarily by the “Magnificent Seven” group of momentum stocks heavily involved in Artificial Intelligence (AI). This strength placed the Nasdaq Composite at the forefront, posting a significant gain of 2.69% to close at 22,872.01. The S&P 500 rose by 1.55% to 6,705.12, and the Dow Jones Industrial Average gained 0.44% to 46,448.27.
Fed Signals Boost Optimism
A recent spate of economic reports, delayed due to a government shutdown, suggested pockets of labor market weakness alongside persistently high inflation. This mixed data reinforced investor belief that the Fed will implement its third and final interest rate cut of 2025 at its upcoming December monetary meeting.
Dovish comments from several key Federal Reserve officials added further support to this optimistic outlook. Consequently, financial markets are now pricing in an 85% likelihood of a rate cut occurring in December, a substantial jump from 42.4% just a week prior. This sentiment allowed investors to “breathe a sigh of relief” regarding the central bank’s policy path.
Strong Earnings and Sector Performance
The third-quarter earnings season is nearing its conclusion with solid results. Nearly 95% of S&P 500 companies have reported, and a robust 83% delivered earnings that exceeded expectations. Analysts now project that aggregate earnings growth for the S&P 500 constituents will reach 14.7% for the third quarter, a significant improvement from the 8.8% estimate reported at the start of October.
Among the 11 major sectors of the S&P 500, Communication Services recorded the largest percentage gain. Conversely, only two sectors closed in negative territory: Consumer Staples and Energy stocks.
Market Focus Shifts to Consumer Health
The health of the US consumer, who drives approximately 70% of the economy, is set to be a key focus as the critical holiday shopping season begins this week with the Thanksgiving holiday. Despite increasing layoff announcements and softer survey reports, the National Retail Federation anticipates that holiday sales will surpass $1 trillion for the first time.
The economic data flow continues this week, featuring important releases such as Retail Sales, Producer Prices, Pending Home Sales, and the Conference Board’s Consumer Confidence report. These figures will provide further clarity on economic momentum and inflation pressures ahead of the Fed’s next decision.
Individual Stock Movers and Market Outlook
Investment bank Deutsche Bank helped boost market risk appetite by issuing an exceptionally bullish projection, forecasting that the S&P 500 could reach 8,000 by the end of 2026—the most optimistic outlook among major global brokerages.
In corporate news, Bristol-Myers advanced after positive late-stage data was released for a rival firm’s cardiovascular drug, increasing confidence in Bristol-Myers’ own experimental drug. Meanwhile, health insurers Centene and Oscar Health saw significant jumps after reports suggested a potential extension of Affordable Care Act subsidies.
Despite the strong daily gains, volume on US exchanges remained high, totaling 18.32 billion shares. Advancing issues comfortably outnumbered decliners on both the NYSE (2.3-to-1 ratio) and the Nasdaq (2.16-to-1 ratio), indicating broad participation in the day’s positive movement.
