Market Rally Driven by Growth Bets Amid Fed Rate-Cut Hopes

Equities are posting solid gains today as investors position ahead of what could prove friendly monetary signals from policymakers. The S&P 500 is advancing +0.39%, while the Dow Jones Industrial Average climbs +0.27% and the Nasdaq 100 pushes +0.50% higher. Futures markets reflect similar momentum, with December E-mini S&P contracts gaining +0.40% and December E-mini Nasdaq contracts advancing +0.47%.

The underlying narrative centers on expectations that central bank policy may turn more accommodative soon. The 10-year Treasury yield has fallen 3 basis points to 4.16%, signaling renewed appetite for rate-sensitive sectors. Fed Governor Stephen Miran’s recent commentary—characterizing current policy as unnecessarily restrictive given benign inflation trends and softening labor market signals—has reinforced this sentiment.

Economic Data Paints Mixed Picture

Today’s releases offered nuance to the market narrative. The December Empire State Manufacturing Index surprised to the downside, contracting 22.6 points to -3.9 when consensus had expected +10.0. This weakness aligned with dovish signals but also raised questions about manufacturing momentum heading into 2026.

Internationally, China’s economic data disappointed. November industrial production eased to +4.8% year-over-year versus October’s +4.9%, falling short of the +5.0% consensus. Retail sales growth decelerated sharply to +1.3% year-over-year, well below the +2.9% expected and marking the weakest pace in nearly three years. Most concerning: new home prices extended their losing streak to 30 consecutive months of declines, underscoring persistent property sector weakness.

The Week Ahead: Where Markets Will Focus

This week brings a deluge of US economic data that could either validate or challenge the current bullish anticipation. Tuesday serves as the critical inflection point. November employment figures are projected at +50,000 new jobs, with the unemployment rate expected to hold at 4.5%. Average hourly earnings are forecast to rise +0.3% month-over-month and +3.6% year-over-year. October retail sales are expected up +0.1% month-over-month (ex-autos: +0.2%), while December manufacturing PMI is anticipated to decline slightly to 52.0.

Thursday brings weekly jobless claims data, expected to fall 11,000 to 225,000, alongside November inflation readings. The headline Consumer Price Index is projected at +3.1% annually with core CPI at +3.0%. By Friday, markets will digest November existing home sales (expected up +1.2% to 4.15 million) and the University of Michigan consumer sentiment revision (expected +0.2 to 53.5).

Options markets are currently pricing a 27% probability of a 25-basis-point Fed rate cut at the January 27-28 FOMC meeting, though that probability could shift dramatically based on this week’s economic releases.

Global Markets: Divergent Paths

The picture overseas remains mixed. Europe’s Euro Stoxx 50 gained +0.71%, bolstered by softer eurozone data and speculation about potential ECB accommodation. Japan’s Nikkei Stock 225 declined -1.31% amid broader regional weakness, while China’s Shanghai Composite fell -0.55% despite supportive policy commentary from Beijing.

Treasury Markets React to Technicals and Policy Shift

March 10-year T-notes are rallying +7 ticks, with yields dropping 2 basis points to 4.165%. The catalyst stems from both softer economic data and Fed communications suggesting potential policy flexibility. However, upside remains capped as stock strength and yield curve steepening pressures longer-duration debt.

The curve’s steepening reflects the Fed’s newly announced Treasury bill purchase program—up to $40 billion monthly starting today—designed to enhance financial system liquidity. This technical buying of short-term instruments has forced longer-maturity yields higher. Additional headwinds for extended Treasuries include lingering inflation concerns and institutional focus on Fed independence.

European government bonds are moving higher in sympathy. Germany’s 10-year bund yield fell 1.7 basis points to 2.840%, while the UK’s 10-year gilt yield dropped 2.2 basis points to 4.494%. Current swap pricing suggests zero probability of a 25-basis-point ECB rate cut at Thursday’s policy decision.

Individual Stock Moves Shape Sector Momentum

Semiconductor equities are leading today’s advance. KLA Corp surged +4% following Jeffries’ upgrade to buy with a $1,500 price target. Supporting performers include Micron Technology (+2%), Lam Research (+2%), Applied Materials (+1%), Advanced Micro Devices (+1%), NXP Semiconductors (+1%), Nvidia (+1%), and ASML Holding (+1%).

Commodities strength is benefiting mining operators. Gold and copper both climbed +1%, while silver jumped +3%. Barrick Gold, Newmont, Hecla Mining, and Freeport-McMoRan are all trading higher.

Notable individual gainers include biotech play Immunome, which surged +23% on positive Phase 3 trial data for Varegacestat in desmoid tumor patients. ZIM Integrated Shipping Services advanced +5% after reports that MSC submitted acquisition interest. Akamai Technologies gained +4% following KeyBanc’s double upgrade to overweight with a $115 price target. Teradyne rose +3% after Goldman Sachs upgraded to buy from sell (price target: $230). Corebridge Financial added +3% after confirmation it will join the S&P MidCap 400 on December 17. Doximity climbed +2% on Morgan Stanley’s upgrade to overweight ($65 target), while Charles River Laboratories advanced +2% after JPMorgan raised its price target to $190.

Conversely, ServiceNow led decliners with a -9% plunge following KeyBanc’s downgrade to underweight (target: $775). ARM Holdings fell -3% after Goldman Sachs downgraded to sell ($120 target). Entegris dropped -2% following a Goldman downgrade to sell ($75 target). LyondellBasell declined -1% after BMO’s downgrade to underperform. Adobe fell -1% on KeyBanc’s downgrade to underweight ($310 target), while Texas Instruments retreated -1% following Goldman’s double downgrade to sell ($156 target).

Earnings Slate

Companies scheduled to report earnings on December 15, 2025 include Dakota Gold Corp, Lifezone Metals Ltd, Lionsgate Studios Corp, and Triller Group Inc.