Investor focus remained locked on the Federal Reserve’s upcoming policy decision, with markets now pricing in nearly an 83 percent chance of a quarter-point rate cut in December, according to the CME FedWatch tool.
Rate expectations accelerated after Bloomberg reported that White House National Economic Council Director Kevin Hassett is being considered the leading candidate for the next Fed chair, a choice markets see as more likely to support President Donald Trump’s preference for lower interest rates. Treasury Secretary Scott Bessent told CNBC there is a “very good chance” Trump will announce his pick before Christmas.
The shift in sentiment also followed comments from New York Fed President John Williams, who said Friday there is room to lower rates “in the near term.”
“Before Friday, we had a 40 percent chance of a Fed rate cut. Now we have an 80 percent chance. I’ve never seen that kind of volatility and expectations for a Fed cut in the span of a few days. The market is hyper-focused on this issue,” said Ron Albahary, LNW’s chief investment officer. “I can’t predict the future, but it seems like the narrative is trending towards a Fed rate cut on Dec. 10, supportive of a Santa Claus rally.”
Alphabet led Tuesday’s gains, rising 1.5 percent to new record highs after The Information reported Meta Platforms is considering spending billions on Alphabet’s AI chips. The development comes just a week after Alphabet unveiled its upgraded AI model.“As computing becomes cheaper, will that increase consumption? Yes, it likely will increase consumption and demand for it, Albahary told CNBC. However, Nvidia shares fell more than 2 percent as investors weighed whether Meta’s reported interest in Alphabet’s chips signals new pressure on Nvidia’s long-standing dominance in AI semiconductors.
Nvidia responded to Wall Street worries by insisting its AI technology remains a full generation ahead of competitors, despite growing attention on Google’s AI chips. The company said it continues to supply Google and praised its advances, but emphasized that Nvidia is “the only platform that runs every AI model everywhere computing is done.” The statement aimed to reassure investors concerned about challenges to Nvidia’s dominance in AI infrastructure.
Alphabet had already climbed more than 6 percent on Monday, when the Nasdaq logged its best day since mid-May. Both Alphabet and Broadcom have attracted investors with their growing roles in advanced ASIC chip development.
Despite the recent rebound, all three major indexes remain on track for a losing month. The S&P 500 is down roughly 1 percent in November, the Nasdaq has slipped about 3 percent, and the Dow is lower by nearly 1 percent month to date. Still, Tuesday’s rally capped a third straight day of gains for US markets.
