U.S. equity markets surged Monday, driven by renewed optimism that the Federal Reserve may cut interest rates in December and strong gains in artificial intelligence–focused technology stocks.
The S&P 500 climbed about 1.5 percent, while the Nasdaq jumped roughly 2.7 percent, and the Dow Jones Industrial Average added about 0.4 percent. The rally comes as investors kick off a holiday-shortened trading week, buoyed by signs that central bankers could ease policy soon.
The shift in sentiment follows remarks from a senior Fed official suggesting room for further rate adjustments. That helped push down Treasury yields and reinforce expectations of an imminent rate cut. According to market models, the odds of a December cut now stand near 85 percent.
Big tech names powered much of the upside. Alphabet surged more than 6 percent on enthusiasm around its Gemini AI model, while Nvidia also posted solid gains. These moves reflect a broader rotation back into high-growth names after a challenging November, when the Nasdaq tumbled amid profit-taking and concerns over stretched valuations.
Market analysts see today's rebound as a potential turning point. After one of the weakest Novembers since 2008—with the S&P falling nearly 2 percent and the Nasdaq dropping more than 3 percent—investors are now looking for year-end momentum. Historically, November and December can deliver strong gains, especially if rate cuts materialize.
However, volatility remains elevated, and caution is creeping into the outlook. According to recent commentary from Evercore ISI Research, many companies have failed to sustain post-earnings gains, suggesting that bullish expectations may already be priced in. Elevated optimism around AI and uncertain policy may be contributing to the choppiness.
On the economic front, mixed labor market data is helping fuel the debate. While nonfarm payrolls posted solid gains earlier in the quarter, unemployment recently ticked higher, raising questions about the labor market's strength. At the same time, inflation remains sticky in certain sectors, even as core prices have cooled, complicating the Fed's decision-making.
Energy and consumer discretionary stocks are lagging today, as investors remain focused on policy and growth. Meanwhile, defensive healthcare names are under pressure following disappointing clinical trial results. Among them, a high-profile Alzheimer's drug trial failure is weighing on related stocks.
Looking ahead, investors will be watching upcoming U.S. inflation data closely, especially the producer price index. That report could be a key factor in shaping Fed policy expectations just ahead of the December meeting. As traders weigh the backdrop of soft inflation, mixed labor trends, and lofty tech valuations, the market may need fresh catalysts to maintain its current footing.
Still, for now, Wall Street appears willing to embrace optimism — a hopeful signal as year-end approaches.
