US equities increase as optimism for Federal Reserve rate cuts builds ahead of December’s policy meeting. The US stock markets experienced significant gains last Friday, driven by growing market sentiment that the Federal Reserve (Fed) is likely to reduce interest rates during its upcoming Federal Open Market Committee (FOMC) gathering scheduled for December 10. This optimistic outlook propelled the markets during a shortened trading week before the holiday, with notable performances across major indices. The Nasdaq 100 advanced by nearly 5%, rising 4.93%, while the S&P 500 grew by 3.73%. The Dow Jones Industrial Average soared, adding 1,471 points, which translates to a 3.18% increase.
Although all three indices concluded the week with positive results, November displayed a mixed overall performance. The S&P 500 and the Dow managed to secure monthly gains. However, the Nasdaq 100's streak of seven consecutive months of growth was snapped as it declined by 1.64% in November. This weakness was largely influenced by a significant 12.59% drop in NVIDIA's stock, bringing its share price down to $177.00 and marking its worst month since March. Investors shifted funds away from AI-focused chip stocks like NVIDIA and toward giants like Alphabet, which surged by 13.59% last month, closing at $320.12.
This shift is largely driven by Google's cloud services, which saw a remarkable 34% increase in revenue, propelled by explosive demand for tensor processing units (TPUs). The recent launch of Google’s Gemini 3—its most advanced multimodal model designed specifically for TPU clusters and integrated into Google Search—further bolsters this trend. Many analysts believe this momentum has more room to grow.
Looking ahead, this week will feature several key economic data releases:
- The September core personal consumption expenditures (PCE) inflation measure, an important indicator of inflation trends.
- Personal income and expenditure reports, offering insights into consumer spending habits.
- The November Institute for Supply Management (ISM) manufacturing and services purchasing managers' index (PMI) reports.
Of particular interest is the ISM services PMI, as services sectors account for roughly 70% to 75% of the US gross domestic product (GDP). The upcoming release, scheduled for Thursday, will shed light on the current state of the labor market and overall economic health. Although the Federal Reserve is currently in a blackout period—meaning no policy statements are expected—it’s worth noting that Federal Reserve Chair Jerome Powell will speak at a memorial event on Monday, and Vice Chair Lael Brainard, also known as Bowman, will testify before the House Financial Services Committee on Thursday.
Regarding the ISM services PMI, data from October showed a strong growth of 52.4, surpassing expectations and the previous month’s reading of 50.0. This was the most robust expansion since February 2025, though employment within the sector remained in contraction at 48.2, albeit slightly better than September’s 47.2. Economists anticipate a modest increase in November’s figure to around 52.7, but market focus will likely be on whether employment figures show continued weakness. Persistent employment contraction could reinforce the market’s expectation of a potential 25 basis point rate cut at the December FOMC meeting, which is currently priced in at over 85%.
Turning to technical analysis, the Nasdaq 100 recently broke above crucial support levels around 24,000 after a false downward move on November 21, followed by a rally the next day. This movement suggests that the December lows at 23,854 may serve as a solid bottom for the correction from the late October high of approximately 26,182. As long as the index stays above this medium-term support zone, a bullish outlook remains intact, with the potential for a Wave V rally targeting the record high of 26,182, and possibly pushing toward 27,000.
Similarly, the S&P 500 showed a key technical turnaround last week. After breaking and rebounding from support at around 6,550, the index is considered to be forming the bottom of its recent correction, which began from a high of around 6,920 in late October. If it continues to hold above support levels near 6,520–6,550, expectations remain high for a Wave V rally that could test the previous peak and potentially reach 7,000.
In summary, this week promises to be pivotal, with important economic indicators and speeches that could influence market direction. The overarching question remains: Will these positive technical signals and optimism about rate cuts translate into sustained gains, or are we overlooking potential risks? Share your thoughts below—do you agree with the current bullish sentiment, or do you see warning signs ahead?
