Weekly Market Recap: Markets Surge as December Rate-Cut Odds Hit New Highs

Market Overview

Stocks delivered a strong holiday-shortened week, staging a broad rally powered by renewed optimism that the Federal Reserve will cut rates in December. The major averages reclaimed their 50-day moving averages and recovered much of the ground lost earlier in November. The Nasdaq Composite rose 4.9% for the week, while the S&P 500 gained 3.7% and the Dow Jones Industrial Average advanced 3.0%. Small- and mid-caps also participated, with the Russell 2000 up 5.5% and the S&P Mid Cap 400 rising 3.9%.

Leadership was clear throughout the week. Semiconductors staged a major rebound, with the PHLX Semiconductor Index advancing 9.7% and chipmakers showing renewed strength. Mega-cap growth stocks continued to anchor the recovery. Technology, communication services, and consumer discretionary stocks contributed heavily to the gains, while all eleven S&P 500 sectors finished the week in positive territory. Tech-adjacent strength—AI, mega-caps, and chips—helped restore confidence following the early-November pullback, and even sectors that lagged earlier in the month joined in the rally.

Energy saw early-week softness but finished firmly higher on Friday as crude oil prices recovered. Health care, after a standout month, experienced modest profit-taking but remained one of November’s best performers. Treasury yields edged lower as markets priced in rising expectations for a December rate cut, with the 10-year yield moving closer to 4.00% and the 2-year yield hovering near 3.50%.

Federal Reserve Insights & Economic Roundup

Federal Reserve commentary was the dominant narrative of the week. Several officials, including Governor Christopher Waller and San Francisco Fed President Mary Daly, signaled explicit support for a December rate cut. Their remarks helped push the CME FedWatch probability for a 25-basis-point reduction above 85% early in the week before settling near 83%. Fed Governor Stephen Miran added that he will not push for a larger cut, indicating increasing unity within the committee. Reports also surfaced that Kevin Hassett is emerging as a frontrunner for the next Fed Chair nomination, adding another storyline to the policy backdrop.

Economic data painted a picture of a cooling economy with areas of resilience. Retail sales rose 0.2% in September, though most of the increase came from gasoline. Excluding gasoline station sales, retail spending was flat, signaling a slowdown in goods demand. Wholesale inflation remained sticky, with the Producer Price Index increasing 0.3% and food inflation continuing to pressure consumers. Consumer confidence weakened sharply, falling to 88.7 amid concerns about business conditions, the labor market, and household income trends.

Housing data was more constructive. Pending home sales jumped 1.9%, and both the FHFA and Case-Shiller home price indices showed continued year-over-year stability. Durable goods orders rose 0.5%, while business spending—measured through nondefense capital goods orders excluding aircraft—also increased 0.9%, signaling ongoing investment strength. Initial jobless claims fell to 216,000, the lowest since April, underscoring a labor market that remains far from recessionary conditions. The Fed’s Beige Book reported little overall change in economic activity, with modest consumer softness but continued strength in higher-end spending.

Taken together, the week’s economic data supports the Federal Reserve’s evolving stance. Inflation pressures continue to ease gradually, spending is moderating, and employment remains stable, reinforcing the narrative that the Fed may have room to pivot toward easing before year-end.

The Week Ahead

Monday: Fed Chair Powell Speech, ISM Manufacturing PMI

Tuesday: Key inflation commentary and updated Fed speeches may shift expectations for the December meeting.

Wednesday: ADP Employment, ISM Services PMI

Thursday: Jobless claims offer another read on labor market tightness and consumer health.

Friday: PCE report