In a solid start to the week, both the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) closed higher by over 1.5%.
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The odds of a 25 bps rate cut at the December 9-10 Federal Open Market Committee (FOMC) meeting have staged a significant comeback over the past week, nearly doubling to 80.9% from 42.4% on CME’s FedWatch tool. Fed Bank of New York President John Williams, a close confidant of Fed Chair Jerome Powell, kicked off the rally after voicing his support for a rate cut next month.
San Francisco Fed President Mary Daly added fuel to the flame on Monday after saying that she favors a December rate cut in order to support a “vulnerable” labor market. Daly added that labor market risks outweigh inflation risks, citing “how tariff-driven cost increases have been more muted than anticipated earlier this year.” Rate cuts are generally seen as a positive catalyst for stocks because they allow individuals and companies to borrow capital at a lower rate, spurring economic growth and employment.
President Trump held a phone call with Chinese President Xi Jinping this morning, discussing topics like trade, the Ukraine-Russia war, agriculture, and the flow of fentanyl. Afterward, Trump said that the conversation was “very good” and that the relationship between the U.S. and China is “extremely strong.” Earlier this month, the two leaders met in South Korea and agreed to a trade deal, with terms including the U.S. lowering its tariff rate on Chinese imports to 47% from 57% and China promising to ease restrictions on rare earth export and ramp up U.S. soybean purchases.
“This call was a follow up to our highly successful meeting in South Korea, three weeks ago,” Trump said in a Truth Social post. “Since then, there has been significant progress on both sides in keeping our agreements current and accurate.”
Bullish outlooks from Wall Street also helped lift the stock market. Deutsche Bank set its 2026 S&P 500 price target to a street-high of 8,000 and its EPS estimate to $320, while Morgan Stanley’s Mike Wilson recommended that investors take advantage of near-term weakness and buy the dip. “The weakness under the hood is a sign that we’re closer to the end of this correction, than the beginning,” said Wilson. Furthermore, HSBC set its S&P 500 price target to 7,500, led by AI growth and easing policy uncertainty.
The S&P 500 (SPX) closed with a 1.55% gain, while the Nasdaq 100 (NDX) returned 2.62%.
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