Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., Nov. 25, 2025.
Brendan McDermid | Reuters
The Dow Jones Industrial Average closed higher on Tuesday following another winning session, with traders evaluating expectations of a Federal Reserve interest rate cut and the state of the artificial intelligence trade.
The blue-chip index advanced 664.18 points, or 1.43%, to close at 47,112.45. The S&P 500 gained 0.91% to settle at 6,765.88, while the Nasdaq Composite climbed 0.67% to finish at 23,025.59. That marks a turnaround from the losses seen earlier in the day. At session lows, the S&P 500 was down about 0.7%, while the Dow and tech-heavy Nasdaq dropped more than 100 points, or 0.2%, and more than 1%, respectively.
Investors continue to watch for any news that can affect the Fed’s upcoming monetary policy decision. Markets are pricing in an almost 83% chance of a quarter percentage point cut from the central bank in December, per the CME FedWatch tool.
Expectations received a bit of boost after Bloomberg reported that White House National Economic Council Director Kevin Hassett is being considered as the frontrunner to become the next Fed chair. Hassett is seen by investors as someone more likely to push the central bank toward a lower-rate regime favored by President Donald Trump. Treasury Secretary Scott Bessent told CNBC Tuesday that there’s a “very good chance” that Trump will “make an announcement before Christmas.”
The probability has soared since New York Fed President John Williams said on Friday that there was room to lower rates “in the near term.”
“Before Friday, we had a 40% chance of a Fed rate cut. Now we have an 80% chance. I’ve never seen that kind of volatility and expectations for a Fed cut in the span of a few days. The market is hyper-focused on this issue,” said Ron Albahary, LNW’s chief investment officer. “I can’t predict the future, but it seems like the narrative is trending towards a Fed rate cut [on] Dec. 10, supportive of a Santa Claus rally.”
Alphabet was a winner of Tuesday’s session, closing up 1.5% and scoring new record highs, after The Information reported, citing sources, that Meta Platforms was considering spending billions of dollars on the Google parent’s AI chips.
“As compute becomes cheaper, will that increase consumption? Yes, it likely will increase consumption and demand for it. We’re seeing that play out, I think, in real time with Meta buying chips from Google,” Albahary told CNBC. “I think that bodes well for the broader AI space.”
Between Meta reportedly considering Alphabet chip purchases and the latter’s announcement just last week of its upgraded AI model known as Gemini 3, the CIO is confident that the broader economy is going to benefit from AI. He noted that compute costs potentially going down from here could make it a lot easier for non-tech companies to “take advantage of the productivity gains and drive earnings growth.”
However, with Nvidia down more than 2% following the report, investors could be taking it as a sign that the company’s dominance in the AI chips space might be under threat.
“What I’m more concerned about, or thinking about, is the second-order effects on the broader players like Microsoft and Amazon,” Albahary added. “Is this a moment in which you might see a change in leadership from the Nvidia’s of the world?”
Alphabet had risen more than 6% in the prior day, which additionally saw the Nasdaq record its best day since mid-May. Investors have rallied behind the “Magnificent Seven” member as well as Broadcom, which are related through their high-performance, application-specific chips, or ASICs, businesses.
Although stocks have recovered some of the ground lost last week, the three U.S. indexes are still tracking for a losing month, as investors have been questioning tech stock valuations. The S&P 500 is down around 1% in November, while the Nasdaq has fallen approximately 3%. The 30-stock Dow has shed roughly 1% month to date.
