- US equities surged amid improved risk sentiment and a surge in tech giants.
- Alphabet and Broadcom remained the winners, gaining 6% and 11% respectively.
- Increased Fed rate cut odds keep equities in the positive zone.
US equities remained firm on Monday night after a strong rebound, with investors rotating back into technology and AI stocks, while repricing expectations for a December Fed rate cut.
The bounce followed a broad surge during Monday’s session, with the Nasdaq Composite gaining 2.7%, marking its best performance since May, while the S&P 500 gained 1.6%. The rebound eased concerns after last week’s sharp decline, the worst weekly correction since August.
Mega-cap tech stocks led the move with Alphabet rallying 6.4%, boosted by enthusiasm regarding the Gemini AI model. Meanwhile, Broadcom jumped more than 11%, becoming the top performer of the S&P 500. Nvidia also recovered 2% following a 10% decline this month, as many investors are still wary of stretched valuations.
Still, major US indices remain on track to close the month with losses, as the S&P is down 2% in November, while the Nasdaq is off 3.6%. Analysts warn that Fed uncertainty and overcrowded AI trade continue to stifle the volatility in November.
The Fed rate outlook is shifting as markets now price in an 80% probability of a 25-basis-point rate cut in December, following New York Fed President John Williams’ statement that there is more room to cut rates in the near term due to waning labor market conditions. San Francisco Fed President Mary Daly also emphasized the need to respond to labor market deterioration.
Some analysts argue that last week’s downturn may have been overdone. Invesco’s Chief Global Market Strategist, Brian Levitt, noted, “The markets got oversold in the short term, and pessimism levels were rising.” He further added that the weaker economic data support the odds for policy easing.
On the other hand, Treasury yields ticked lower, with 10-year yields slipping to 4.03%, which helped boost risk sentiment. Global equities also advanced amid expectations of Fed easing and progress on Ukraine-Russia peace talks.
The US markets will remain closed on Thursday for Thanksgiving and will reopen half a day on Friday; liquidity is expected to remain thin. Fed commentary, retail sales, and US PPI figures will remain key catalysts that could shape momentum in December.