Stock Market Rises Amid Interest Rate Cut Hopes/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ U.S. stocks edged higher Tuesday, lifted by renewed investor optimism over a potential December interest rate cut. While most sectors rose, a steep decline in Nvidia and AMD shares dragged on tech-heavy indexes. Economic data and earnings results shaped the day’s trading sentiment.
US Stock Market Quick Looks
- S&P 500 and Dow Jones opened slightly higher on Tuesday.
- Dow rose 288 points while Nasdaq dipped 0.3% due to tech weakness.
- AI chipmakers Nvidia and AMD fell sharply amid Meta-Alphabet chip report.
- Retailers Abercrombie & Fitch and Kohls posted surprise profits, boosting shares.
- Analysts now see 85% probability of Fed rate cut in December.
- Mixed economic signals: retail sales slipped, inflation remains sticky.
- 10-year Treasury yield eased slightly to 4.01%.
Stock Market Rises Amid Interest Rate Cut Hopes
Deep Look
Stocks on Wall Street inched higher Tuesday morning as investors weighed fresh economic data and corporate earnings, with expectations rising that the Federal Reserve could cut interest rates again in December. While the overall tone was positive, tech shares struggled—particularly those tied to the booming artificial intelligence industry.
The S&P 500 edged up by just 0.1% in early trading, despite the fact that around 80% of the stocks within the index were in positive territory. The Dow Jones Industrial Average posted a stronger start, climbing 288 points (0.6%), while the Nasdaq composite dropped 0.3%, pulled down by a sharp selloff in AI-linked chipmakers.
The AI sector saw volatility after reports emerged that Meta Platforms is in advanced talks to source billions of dollars’ worth of AI chips from Alphabet, potentially reducing its reliance on chipmakers like Nvidia and Advanced Micro Devices. The impact on investor sentiment was swift—Nvidia’s stock tumbled 4.8%, while AMD saw a sharper 7.4% decline.
Meanwhile, Alphabet continued its upward momentum, gaining 1.6% amid investor enthusiasm surrounding its newly released Gemini AI model. Chinese tech giant Alibaba saw its U.S.-listed shares swing between gains and losses after posting stronger-than-expected quarterly revenue, largely thanks to AI-related demand.
In retail, corporate earnings fueled sharp movements. Abercrombie & Fitch surged 20.9% after beating Wall Street expectations and raising guidance for the full year. Kohls jumped 32.4% after swinging to a quarterly profit, catching analysts off guard.
On the downside, Dick’s Sporting Goods dropped 3.2% after missing profit forecasts. The company cited efforts to clear inventory, including excess stock acquired from Foot Locker, as a factor weighing on margins.
Beyond earnings, macroeconomic news provided support for the broader market. A new batch of economic reports gave investors more reasons to believe the Fed could ease policy. Most notably, U.S. retail sales in September came in lower than expected, suggesting a softening consumer sector.
Meanwhile, wholesale inflation for the same month was slightly hotter than forecast, but a key underlying metric improved. The nuanced inflation picture gave investors reason to believe the Fed could continue with rate cuts, particularly if price pressures are viewed as manageable.
According to CME Group data, futures traders now price in an 85% chance that the Federal Reserve will lower interest rates in December. That’s a sharp increase from a week ago, when odds were closer to 50-50.
Lower interest rates are generally favorable for stock markets. They make borrowing cheaper, reduce returns on safer assets like bonds, and help justify higher equity valuations. However, they also risk reigniting inflation, meaning the Fed must balance economic support with inflation control.
In the bond market, yields showed modest movement. The 10-year Treasury yield dipped slightly to 4.01%, down from 4.04% late Monday, offering additional support to equities.
Internationally, global stock indexes moved higher. Gains were seen across much of Europe and Asia as investors in those regions also hoped for central banks to adopt more accommodative monetary policy in the face of cooling economic data.
In summary, Tuesday’s market movement underscored an increasingly complex environment. While optimism over rate cuts provided tailwinds, sector-specific setbacks—particularly in AI technology—kept broader gains in check. With inflation data, consumer activity, and central bank guidance continuing to shape sentiment, investors remain focused on the Fed’s next steps.
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