Benchmark indices on Wall Street rallied for the third day in a row on Tuesday as hopes of a Fed rate cut in two weeks from now continued to fortify, fueling a recovery from the recent sell-off.
The Dow Jones recovered 800 points from the lows of the session to end with gains of 650 points. The index has now rallied 1,360 points in the last three sessions, recovering 55% of the recent 2,500-point sell-off. The S&P 500 and Nasdaq, which traded mostly lower in the first half of the session, also recovered to end 0.9% and 0.7% higher respectively.
Gains on the Nasdaq were led by shares of Meta, Alphabet and Amazon, while Nvidia fell 2.5% on worries of increased competition from Alphabet.
A slew of macro data was reported through the day which further boost hopes of a Fed rate cut. The delayed Producer Price Inflation data for September was in-line with estimates, while the core PPI was below expectations. Retail sales were below analyst projections month-on-month, but adjusted for auto sales, they were in-line. Consumer confidence though, fell to the lowest level since April and also missed expectations.
In further signs of labor market weakness, the ADP private payrolls report showed that companies lost 13,500 jobs a week on average over the last four weeks, compared to 2,500 jobs lost per week as per the last report.
These are the final few data points that the Fed would receive before its December 10 policy meeting. The Bureau of Labor Statistics will not release CPI data for October, while the one for November will be released on December 18, after the policy decision.
Based on the CME FedWatch, the probability of the Fed cutting by 25 basis points on December 10 now stands at 85%. Goldman Sachs expects one more rate cut in December, followed by two 25 basis points cuts in 2026.
What further boosted hopes of lower interest rates was a Bloomberg report that White House National Economic Council Director Kevin Hassett is now the front-runner to be the next Fed Chair. Hassett is a close ally of US President Donald Trump and has voiced his views of cutting rates right now if he were Fed Chair because the “data suggests so.” Treasury Secretary Scott Bessent told CNBC that US President Donald Trump may announce the next Fed Chair before Christmas.
Today will be the final full session of the week on Wall Street. Markets will remain shut for Thanksgiving on Thursday and close early on Friday. Initial jobless claims of the most recent week, followed by Durable Goods orders are expected later in the day.
Rising hopes of a US Fed rate cut sent the US Dollar index back below 100, while Gold prices remained firm. The 10-year yield also fell below the mark of 4%.