Market Rally Fueled by Fed Rate Cut Expectations—Here's What's Driving Stocks Today

The broader market is catching a tailwind from growing optimism surrounding potential Fed rate cuts. The S&P 500 notched a 2-week high with a +0.23% gain, while the Nasdaq 100 climbed +0.34%, and the Dow Jones Industrials rose +0.27%. December futures are echoing the bullish sentiment, with E-mini S&P futures up +0.20% and E-mini Nasdaq futures jumping +0.32%.

What’s fueling this rally? Bond yields are retreating sharply. The 10-year T-note yield dipped to a 1-month low of 3.96%, signaling market conviction that the Fed will take action at next month’s FOMC meeting on December 9-10. The probability of a 25 basis point rate cut has surged to 84%—a dramatic shift from just 30% the previous week. This dovish pivot has traders pricing in rate relief with mounting confidence.

Energy stocks are another force propelling the market higher. WTI crude has climbed to a 1-week high, up more than 1%, pulling energy producers along for the ride. Devon Energy, Diamondback Energy, Marathon Petroleum, ConocoPhillips, Valero Energy, Phillips 66, Halliburton, Chevron, and Occidental Petroleum are all posting gains exceeding +1%, with Devon leading at +2%.

Cryptocurrency-related equities are particularly hot today. Bitcoin has surged past 1% to hit a 1-week high, lifting sentiment for digital asset-exposed stocks. MARA Holdings and Riot Platforms are jumping more than +5% each, while MicroStrategy is leading Nasdaq 100 gainers with a +3% advance. Coinbase Global and Galaxy Digital Holdings are also up more than +2%.

Why the Fed Rate Cut Narrative Is Gaining Traction

Recent economic data has tilted the narrative toward easier monetary policy. The BLS cancelled its October consumer price report, and the November figures won’t drop until December 18. Similarly, the October employment report was shelved, with those payroll numbers to be incorporated into November’s release on December 16. This data void has allowed dovish Fed commentary to take center stage, with no fresh inflation or employment surprises to challenge the rate-cut thesis.

Q3 earnings have also provided a foundation for market confidence. With 475 of 500 S&P companies reporting results, 83% have beaten forecasts—on track for the best quarter since 2021. Earnings rose +14.6%, more than doubling the +7.2% y/y expectation. This earnings resilience suggests the market can withstand lower rates.

Mixed Signals Globally

European markets are riding coattails, with the Euro Stoxx 50 hitting a 1.5-week high at +0.20%. China’s Shanghai Composite closed up +0.34%, and Japan’s Nikkei Stock 225 ended +0.17%. However, the ECB is taking a harder stance—swaps price only a 3% chance of a 25 basis point rate cut at December 18’s policy meeting.

German economic data came in hotter than expected. November CPI surged to +2.6% y/y, the fastest 9-month pace, while October retail sales unexpectedly contracted -0.3% m/m. These mixed signals suggest the ECB will hold steady while global peers potentially shift policy.

Notable Movers Beyond the Headlines

SanDisk climbed more than +4% after reports emerged that Japan and the US are exploring a NAND flash memory manufacturing partnership involving Kioxia Holdings. Oracle, meanwhile, tumbled more than -3% after Morgan Stanley flagged concerns over the company’s debt-funded AI spending spree and potential credit rating pressures. CNH Industrial fell more than -1% following a JP Morgan Chase downgrade to underweight, while Jefferies Financial Group slipped more than -1% amid SEC probes into its First Brands Group ties.

Trading volumes remained muted today due to a technical outage at the Chicago Mercantile Exchange that halted futures and options from Thursday evening until 8:30 AM this morning. The disruption stemmed from cooling system failures at a CME data center in Aurora, Illinois. With markets also running just a half-day post-Thanksgiving, overall activity stayed subdued despite the positive sentiment.