Markets Snap Back as Rate-Cut Optimism Takes Hold
U.S. stocks moved sharply higher on Tuesday as Wall Street returned to rally mode, building on Monday’s powerful rebound. Investors grew increasingly confident that the Federal Reserve is preparing to cut interest rates next month — a shift that has ignited risk appetite across equities.
The Dow Jones Industrial Average jumped more than 500 points, climbing over 1%. The S&P 500 added 0.8%, while the Nasdaq Composite rose 0.5% despite early weakness in the session.
The move comes as traders look to regain momentum after one of November’s rockier stretches. On Monday, the Nasdaq posted its best day since May, powered by a snap-back in megacaps.
Nvidia Sells Off on New AI Chip Competition Fears
One notable drag on Tuesday’s session: Nvidia (NVDA).
Shares fell as much as 6.5% after The Information reported that:
- Meta is in talks with Google to spend billions on the company’s Tensor Processing Units (TPUs).
- Google is pitching its cloud customers on buying TPUs directly — a major shift from its traditional model of renting access.
The report reinforces a broader trend:
Nvidia’s biggest customers are quickly becoming its biggest competitors.
Google, Amazon, and Microsoft all have in-house AI chips and are accelerating development as hyperscalers try to reduce dependence on Nvidia’s supply-constrained GPUs.
Despite the pressure, the broader tech sector remained resilient as the rate-cut narrative took center stage.
Delayed Economic Data Keeps Fed Cut Hopes Alive
Shutdown-delayed macro data added fuel to the rally:
- Retail sales for September rose, though slightly below expectations.
- Wholesale inflation (PPI) climbed 0.3% month-over-month, matching forecasts and reversing August’s decline.
- Year-over-year PPI ticked up to 2.7%, showing steady inflationary pressure — but not enough to derail rate-cut expectations.
Markets are now pricing a more than 80% probability of a quarter-point cut in December.
The shift came after comments from Fed Governor Chris Waller, who joined New York Fed President John Williams in signaling support for easing.
Earnings + Holiday Week Outlook
Retailers Kohl’s (KSS) and Best Buy (BBY) headline Tuesday’s earnings slate as markets enter a shortened Thanksgiving week:
- U.S. markets closed Thursday
- Early close Friday at 1 p.m. ET
With limited catalysts ahead, the Fed rate-cut narrative will likely continue steering market sentiment.
WSA Take
Wall Street is leaning hard into the December-rate-cut narrative — and markets are responding exactly how you’d expect: tech is stabilizing, equities are bouncing, and risk appetite is creeping back. Nvidia’s weakness is worth watching, but the bigger story is the macro shift underway. If policymakers keep telegraphing support for easing, this rally may have legs.
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