Year-End Equity Rally Builds as Fed Cut Bets and AI Buzz Lift Futures Into Thin Holiday Trade

U.S. equity futures edged higher on Monday as a year-end rally gathered pace, with investors positioning for potential follow-through into 2026 even as liquidity thins in a holiday-shortened week.

S&P 500 futures rose 0.3% by 06:09 ET (11:09 GMT), extending Friday’s 0.9% jump—its strongest session in nearly a month. Nasdaq 100 futures climbed 0.5%, supported by renewed strength in large-cap technology, while Dow Jones futures were little changed.

The near-term data calendar is light. Markets are set to receive a delayed third-quarter GDP report later in the session, though investors view it as backward-looking—capturing conditions before the government shutdown. Attention is more likely to focus on the Conference Board’s December consumer confidence release after sentiment slid in November to its weakest level since the turbulence around April’s “Liberation Day.” Beyond that, traders see few major catalysts, leaving positioning and liquidity as key drivers.

Tech Leads as AI Optimism Returns

Wall Street closed last week mixed: the S&P 500 finished up about 0.1%, the Nasdaq Composite gained roughly 0.5%, and the Dow fell around 0.7%. The leadership came from heavyweight tech and semiconductors, where a strong outlook from Micron Technology helped revive enthusiasm for AI-linked shares after a period of valuation-driven volatility and debate over whether demand growth can keep pace with elevated capital needs.

Oracle also added fuel to the rebound after reports that TikTok had agreed to sell its U.S. operations to a new joint venture, with Oracle expected to play a central role in cloud and data infrastructure—supporting broader gains across mega-cap technology.

Trading conditions are expected to remain muted into year-end. U.S. markets are set for an early close on Wednesday and will be shut on Thursday for Christmas Day, a setup that typically reduces volume and can magnify intraday swings.

Fed Cut Expectations Add Support

Sentiment has also been underpinned by last week’s softer-than-expected U.S. inflation reading, which reinforced expectations that the Federal Reserve could move toward rate cuts in 2026. The data helped push Treasury yields lower, providing an additional tailwind for equities—particularly growth and technology stocks that are more sensitive to discount-rate assumptions.

Investors are also monitoring developments around the Fed’s leadership transition. With Chair Jerome Powell’s term due to end in May and President Donald Trump reportedly interviewing potential successors, markets are parsing policy signals for any shift in the future path of interest rates and the central bank’s reaction function.