U.S. stocks advanced on Tuesday, reversing earlier losses from the start of the week as a rally in technology shares and a significant jump in Bitcoin's value bolstered investor confidence. The major indices all closed in positive territory, with market participants increasingly optimistic about a potential interest rate cut from the Federal Reserve next month.
The Dow Jones Industrial Average added 185.13 points, a gain of 0.39%, to close at 47,474.46. The broader S&P 500 climbed 0.25% to 6,829.37, while the technology-heavy Nasdaq Composite led the gains, rising 0.59% to finish the session at 23,413.67.
Key Takeaways
- The Dow, S&P 500, and Nasdaq all closed higher, recovering from losses on Monday.
- Artificial intelligence stocks, particularly Credo Technology and Nvidia, were among the top performers.
- Bitcoin surged approximately 7%, contributing to positive market sentiment.
- Market expectations for a Federal Reserve interest rate cut in December have climbed to nearly 89%.
AI and Crypto Provide a Market Lift
The day's gains were largely fueled by renewed enthusiasm in sectors that have defined much of the year's market narrative. Bitcoin experienced a notable recovery, rising around 7% after a downturn in the previous session. This resurgence in the cryptocurrency market appeared to spill over into equities, creating a more favorable risk environment.
Simultaneously, the artificial intelligence sector demonstrated significant strength. Credo Technology, a company that provides essential infrastructure for data centers, saw its shares soar by more than 10%, reaching an all-time high. The surge followed an earnings report that substantially beat analyst expectations.
Credo's Standout Performance
Credo Technology reported adjusted earnings of 67 cents per share on $268 million in revenue, far exceeding the projected 49 cents per share on $235 million. The company's stock has now gained 155% this year.
Other AI-related stocks also benefited. Chipmaker Nvidia, a central figure in the AI boom, gained nearly 1%. The positive momentum reflects a persistent investor appetite for companies positioned to capitalize on AI development, even amid broader market uncertainties about valuations.
Investor Focus Shifts to Federal Reserve
Underpinning the market's upward movement is a growing conviction that the Federal Reserve is preparing to lower interest rates. Traders are now looking ahead to the central bank's policy meeting scheduled to conclude on December 10.
Market data indicates that investors are pricing in a high probability of a rate cut. According to the CME FedWatch tool, the chances of a cut at the upcoming meeting are now estimated at approximately 89%, a significant increase from odds calculated just a few weeks ago in mid-November.
“Markets appear to have moved away from uncertainties surrounding Fed policy... and focusing instead on better-than-expected earnings projections for the fourth quarter,” said Doug Beath, a global equity strategist at Wells Fargo Investment Institute. He noted that investors are looking “beyond the economic soft patch we’re currently experiencing to growth accelerating later next year.”
This sentiment is also supported by historical trends. December is often a strong month for stocks, a phenomenon known as the "Santa Claus rally." The S&P 500 has historically averaged a gain of over 1% in December, making it the third-best performing month of the year since 1950, according to the Stock Trader's Almanac.
Individual Movers and Market Shakers
Beyond the broad market trends, several individual companies made significant moves on Tuesday, highlighting key sector dynamics.
Corporate Highlights
- Boeing: The aerospace giant's stock climbed roughly 9%. The gains came after the company's CFO projected higher deliveries for its 737 and 787 jets in 2026 and the firm secured a new $104.4 million contract with the U.S. Navy.
- Maplebear (Instacart): Shares of the grocery delivery service fell more than 2%. The decline followed an announcement from Amazon that it is testing an "ultra-fast" delivery service in select cities, signaling increased competition.
- XPO: The logistics company saw its stock drop over 6% after reporting that its freight tonnage and shipments both declined in November compared to the previous year.
- Danaher: The science and technology firm received a vote of confidence from Morgan Stanley, which assigned the stock an overweight rating and a price target of $270 per share, citing its strong innovation and competitive positioning.
Valuation Concerns Persist
Despite the day's optimism, some prominent market watchers remain cautious. Michael Burry, known for his role in "The Big Short," recently questioned the valuation of companies like Tesla, arguing they are "ridiculously overvalued." He criticized the common tech industry practice of excluding stock-based compensation from earnings results, suggesting it inflates profit metrics and masks the true cost of doing business.
The session was not without volatility. The Dow and S&P 500 briefly dipped into negative territory during intraday trading before rallying to their positive close. This fluctuation underscores the ongoing tension in the market between bullish hopes for a year-end rally and lingering concerns about persistent inflation and elevated stock valuations.
