Wall Street Bets On December Rate Cut As Stocks Climb

US indexes extended their rebound to two-week highs as traders priced in a likely Fed rate cut next month and early holiday spending hopes lifted sentiment.

What’s going on here?

US stocks climbed for a fourth straight session, with the S&P 500 and Nasdaq hitting two-week highs as traders upped their bets on a Federal Reserve rate cut in December and early signs of solid holiday spending boosted confidence.

What does this mean?

Big tech helped power the rebound, with every S&P 500 sector in the green except communication services, which was dragged down by a drop in alphabet. Under the surface, the economic data looked reasonably solid: weekly US jobless claims fell to 216,000 versus expectations of 225,000, and core capital goods orders – a proxy for business investment – rose 0.5% in September, beating forecasts for 0.3%. Even so, traders are leaning hard into the “soft landing” story and a friendlier Fed: CME’s FedWatch tool now shows an 84.9% chance of a 0.25-percentage-point rate cut next month, almost double last week’s odds, helped by softer consumer demand signals and more dovish comments from Fed officials. One chief investment officer argued the economy isn’t sliding into recession but is weak enough to justify another cut, pointing to elevated unemployment rolls as giving the Fed room to ease. At the same time, markets were poring over the Fed’s Beige Book for a fresh read on regional conditions and weighing reports that a White House economic adviser is a frontrunner for Fed chair – a twist that could raise fresh questions about political pressure on future policy decisions.

Why should I care?

Markets: Rate-cut hopes are doing the heavy lifting.

Renewed optimism has helped indexes claw back ground from this month’s tech-led selloff, even if they’re still on track for their steepest monthly drop since the last tariff-driven rout. Market breadth backed up the upbeat tone: advancing stocks beat decliners by about 2.5 to 1 on the NYSE and nearly 2 to 1 on the Nasdaq, while the S&P 500 logged 14 new 52-week highs and no new lows, and the Nasdaq tallied 60 new highs versus 23 lows. Under the hood, the AI build-out is still a major driver – dell rose after beating forecasts on strong server demand for AI data centers – while old-school PC demand looked shakier, with HP sliding after cutting its profit outlook and announcing job reductions. Retail is another big swing factor: Walmart and Target have delivered mixed updates heading into the crucial Thanksgiving-to-Cyber-Monday stretch, a period that often sets the tone for consumer and retail stocks for months. The National Retail Federation still expects US holiday sales to top $1 trillion for the first time, but shoppers squeezed by higher costs and patchy job markets could make that milestone tougher to reach than the headline suggests.

The bigger picture: Policy, politics, and the consumer are converging.

The Fed is trying to steer a late-cycle economy where growth is slowing but not collapsing, and Thursday’s data – steady jobless claims and rising capital goods orders – fits that “not too hot, not too cold” narrative. That gives officials some wiggle room to trim rates if inflation keeps easing, but the unusually high 84.9% market-implied chance of a December cut suggests traders might be sprinting ahead of the evidence. The Beige Book’s regional anecdotes, along with any leadership change at the Fed, will shape how much independence the central bank can maintain as election timelines and trade debates heat up. Meanwhile, the US consumer is still the global economy’s backbone: household spending makes up roughly 70% of US GDP, and a $1 trillion-plus holiday season would send ripples through supply chains and overseas manufacturers. Taken together, the next few weeks of Fed messaging and holiday spending data could determine whether this is a gentle slowdown with lower rates or the prelude to a tougher adjustment for businesses and governments worldwide.

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Originally Posted November 26, 2025 – Wall Street Bets On December Rate Cut As Stocks Climb