TLDR
- US stocks rallied Tuesday with Dow up 1.2%, S&P 500 up 0.7%, and Nasdaq up 0.4% as markets price in 80% chance of December Fed rate cut
- Nvidia stock dropped 4.3% after reports that Meta is in talks to spend billions on Google AI chips instead of Nvidia products
- September retail sales and producer price index data released after government shutdown delays showed mixed results but supported rate cut expectations
- Fed governor Chris Waller joined other policymakers in advocating for interest rate cuts, boosting market confidence
- US markets will close Thursday for Thanksgiving and operate shortened hours Friday, ending at 1 p.m. ET
US stock markets posted strong gains Tuesday as investors grew more confident the Federal Reserve will cut interest rates in December. The Dow Jones Industrial Average climbed 557 points or 1.2%. The S&P 500 rose 0.7%.
The Nasdaq Composite gained 0.4% after initially trading lower. The tech-heavy index bounced back from morning losses to join the rally. This followed Monday’s strong session that marked the Nasdaq’s best day since May.
Markets are now pricing in more than an 80% probability of a quarter-point rate cut next month. This confidence grew after Fed governor Chris Waller supported easing rates. Other policymakers have also advocated for cuts in recent days.
Delayed economic data released Tuesday did not change investor expectations. September retail sales rose but came in below forecasts. Producer prices increased 0.3% month over month in September, matching expectations.
The producer price index marked an uptick from August’s surprise decline. Year-over-year producer price inflation rose to 2.7%. The data had been delayed due to a government shutdown.
Nvidia Faces Pressure from Competition
Nvidia stock fell 4.3% during Tuesday’s trading session. The drop came after The Information reported Meta is negotiating to spend billions on AI chips from Google. The stock traded as low as 6.5% down earlier in the session.
Meta’s potential deal with Alphabet-owned Google represents a challenge to Nvidia’s market position. Google competes directly with Nvidia in the AI chip market. The semiconductor giant’s market cap currently stands north of $4.4 trillion.
The selling pressure spread beyond Nvidia to other chip stocks. The iShares Semiconductor ETF dropped 1.1%. Advanced Micro Devices also declined during the session.
Eight of the 11 S&P 500 sectors posted gains Tuesday. Tech and utilities sectors were among the decliners. Energy stocks also fell as crude oil futures dropped to their lowest levels since May.
Market Activity Before Holiday
Coinbase Global joined Nvidia and AMD as one of the worst performing S&P 500 stocks. The three stocks weighed on the broader indexes despite the rally. Funds focused on small-caps, value stocks, dividends, and growth all posted gains.
Only exchange-traded funds exposed to momentum plays like Nvidia struggled Tuesday. The broader market showed strength across most categories. Retailers Kohl’s and Best Buy reported earnings Tuesday as part of a light week for corporate results.
US markets will close Thursday for the Thanksgiving holiday. Trading will operate on a shortened schedule Friday, with markets closing at 1 p.m. ET. The Nasdaq’s Monday rally helped the major indexes recover some November losses.
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