Wall Street Jumps on Fed Rate Cut Hopes Driving Tesla and Nvidia Higher

Wall Street rallied Wednesday, buoyed by expectations of a Federal Reserve rate cut. Tesla and Nvidia powered gains as investors looked ahead to the Fed’s policy outlook and corporate earnings.

Wall Street Gains as Investors Eye 2025 Policy Moves

Wednesday saw gains for the key Wall Street indices, which had fallen the day before, as investors awaited signals about what policymakers could do in 2025 and the possibility of an interest rate cut from the Federal Reserve, Investing.com shares.

When the Federal Reserve meets for its final meeting of the year, it is commonly believed that interest rates will be lowered by 25 basis points. On Wednesday at 2 p.m. ET, the announcement is anticipated.

Most investors are bracing for a rate decrease, so all eyes are on the Federal Reserve's summary of economic projections (SEP). This document details the economic outlook of policymakers as well as their long-term interest rate predictions (the "dot plot").

Persistent Inflation Could Shape Fed's Rate Strategy

Recent economic data has revealed both robust growth and persistent inflation, which may prevent the Fed from implementing rate cuts as heavily as anticipated. Therefore, comments made by Chair Jerome Powell will be closely observed for indications regarding how the central bank will decide on policy next year.

"The prevailing view is that the Fed will accompany the rate cut with hawkish comments, indicating that it's time to take a pause in loosening monetary policy," said David Morrison, senior market analyst at Trade Nation.

"This seems wise, given the incoming Trump administration, the recent uptick in inflation, decent U.S. economic growth and the strength of the U.S. stock market."

The following market indexes had gains at 12:00 p.m. ET: the S&P 500 gained 12.56 points, or 0.21%, to 6,063.10; the Nasdaq Composite gained 37.96 points, or 0.19%, to 20,147.02; and the Dow Jones Industrial Average jumped 160.68 points, or 0.37%, to 43,610.58.

Tesla and Nvidia Lead Wall Street's Market Recovery

Companies' stock values are affected by slower growth and the allure of less risky investments caused by higher interest rates, which are generally bad for the equity market.

Nvidia, a leader in artificial intelligence, surged 3.5% after hitting a two-month low on Tuesday, while Tesla, which had lost ground early on, recovered to finish the day up 1%.

General Mills dropped 2.5% when the Cheerios producer lowered its yearly earnings prediction, while Birkenstock surged 6.3% after the shoemaker surpassed market expectations for fourth-quarter results.

Dow Ends Long Losing Streak as Year-End Optimism Grows

Thanks to UnitedHealth Group's 3.2% gain, the Dow is poised to end its longest losing skid since February 1978, which has lasted nine sessions.

With the S&P 500 increasing by more than 27%, the Nasdaq by more than 34%, and the Dow by almost 16%, stocks seem poised to finish the year strongly, despite some concerns about future Federal policies.

Technology companies have been the driving force behind the rally, riding on the wave of excitement surrounding artificial intelligence, the desire for a more favorable tax climate, and the expectation of pro-business measures from the new Trump administration.

Crypto Stocks Decline as Bitcoin Slumps

As bitcoin dropped over 2%, crypto-focused equities also declined. There was a 1.5% drop in MARA Holdings and a 2.2% drop in Riot Platforms.

The ratio of advancing issues to declining ones was 1.03 to 1 on the NYSE and 1.02 to 1 on the Nasdaq, respectively.

While the Nasdaq Composite saw 106 new lows and 67 new highs, the S&P 500 saw eight new lows and five new 52-week highs.