Fed Rate-Cut Hopes Fuel Market Rally, Chip Stocks Lead the Charge

Wall Street’s buying the rate-cut narrative hard today. S&P 500 (+0.60%), Dow (+0.62%), and Nasdaq 100 (+0.70%) all posting 1.5-week highs ahead of Thanksgiving, with December futures mirroring the bullish move.

Here’s the kicker: markets are now pricing in an 80% probability of a -25bp rate cut at the December 9-10 FOMC meeting, up from just 30% last week. Bond yields have tanked on weak US economic data and dovish Fed signals, but here’s the twist—today’s labor data actually looked solid. Weekly jobless claims hit a 7-month low at 216,000 (vs. expected 225,000), and September capital goods orders beat estimates (+0.9% m/m vs. +0.3% expected). The market’s shrugging it off as confirmation the Fed has room to cut without the economy overheating.

The Real Story: Chip Dominance

Semiconductors are the MVP. ASML up +4%, with Marvell, Micron, and Intel all rallying +2%+. Nvidia, AMD, ARM, and the rest of the chip ecosystem are riding the wave. This sector’s carrying the entire market on its shoulders.

Earnings Reality Check

475 of 500 S&P companies have reported. The scoreboard: 83% beat estimates, Q3 earnings surged +14.6% y/y (crushing the +7.2% forecast). Best quarter since 2021. That’s why some stocks are mooning—Autodesk +7%, Urban Outfitters +12%, Robinhood +6% after snagging LedgerX. But cuts are brutal: Nutanix -17%, Zscaler -10%, Workday -8%. Earnings misses = instant pain.

What’s Priced In

The Fed narrative is everything right now. If December’s inflation data doesn’t scream “urgent,” expect more rate-cut hype to drive equities into year-end. Watch the Treasury auctions (another $44B of 7-year notes today) and European policy signals—ECB cutting is only 2% priced in for December 18.

Bottom line: This rally’s riding two rails—earnings beats and Fed easing bets. Chip stocks are the bellwether. Until that changes, momentum stays your friend.