Rising Fed Cut Expectations Lift Sentiment Across Asset Classes

Index Update:  Expectations for a December Fed rate cut have risen above 80% on the back of soft data, dovish Fed signals, and speculation that Kevin Hassett—seen as favoring lower rates—could become the next Fed chair. This boosted market sentiment, lifting major tech stocks in premarket trading. Alphabet gained nearly 2% after a string of record closes, with Microsoft, Apple, Amazon, Meta, and Tesla also advancing. Nvidia was the outlier, slipping over 1% after a prior session decline.

Market Movers:  On Tuesday, the top gainers were Clean Energy Technologies, Inc. (+116.82%), followed by Kohl's Corporation (+42.53%). On the contrary Aditxt, Inc. (-26.33%), and Heritage Distilling Holding Company, Inc. (-25.68%) declined the most the same day.

Commodities Update:  WTI and Brent crude prices hovered near five-week lows on Wednesday as progress toward a potential Ukraine–Russia peace agreement raised the likelihood of sanctions on Russian crude being lifted, heightening supply and glut concerns. This overshadowed a 1.9-million-barrel draw in U.S. crude inventories—the first decline in four weeks—with official data due later in the day. Gold traded near a two-week high around $4,150 per ounce, supported by softer U.S. economic data and rising expectations of a December Fed rate cut, now priced at over an 80% probability. Gains were tempered by easing geopolitical tensions following reports of a potential peace plan between Ukraine and Russia, reducing safe-haven demand.

Macro Updates:  U.S. mortgage applications rose slightly by 0.2% in the week ending November 26, largely stabilizing after the prior week’s sharp drop. Purchase applications jumped 7.6% to their highest level since early 2023, while refinancing activity fell 5.7% as the average 30-year mortgage rate inched up to 6.4%, its fourth straight weekly increase. The MBA noted that affordability challenges persist, leading more buyers toward government-backed loan programs and pushing average purchase loan sizes to a two-month low.

Bonds Commentary:  The 10-year U.S. Treasury yield held near 4.0% and close to one-month lows as markets awaited the Thanksgiving break and weighed the Fed’s next steps. Odds of a December 25 bps rate cut have climbed above 80% amid soft data and dovish Fed signals, while reports that Kevin Hassett may become the next Fed chair—seen as favoring lower rates—also boosted sentiment. Yields were further pressured by expectations that the FDIC will ease SLR rules, allowing banks to hold more Treasuries.

Futures Update:  U.S. stock futures inched higher on Wednesday as growing expectations of a December Fed rate cut supported sentiment. Futures for the Dow, S&P 500, and Nasdaq 100 were all up 0.3–0.4% by early morning. This followed a strong Tuesday session on Wall Street, where major indices posted their third straight gain, and the Dow Jones logged its best day since August with a 1.4% jump.

After displaying a lack of direction early in the session, stocks moved notably higher throughout the trading day on Tuesday. The S&P 500 rose by 60.78 points, or 0.91%, closing at 6,765.89. From a technical perspective, the index found support at important levels and gradually advanced. Additionally, the price remains above its key moving averages, indicating a positive trend. The 14-day Relative Strength Index (RSI) is recovering from lower levels, further supporting a positive outlook. Key support levels are around 6,690, with resistance expected near 6,890.