Risk appetite surges significantly! Expectations of Federal Reserve rate cuts heat up, with Bitcoin, gold, and the Nasdaq rising together.

Market in the Red

The Monday rally was quite fierce. The three major US stock indices all soared: the Nasdaq jumped 2.69%, the S&P 500 rose 1.55%, and the Dow also gained 1.44%. Even the crypto market was active, with Bitcoin reaching $87,670 (up 0.22%) and Ethereum reporting $2,950 (down 0.34%). Gold also broke through the $4,100 mark, currently at $4,134.7 per ounce.

The VIX index, which indicates fear and panic, plummeted 12.4%, signaling a clear easing of market anxiety. Investors’ risk appetite has instantly increased.

Three Major Positive Events Ignite Market Confidence

This rally didn’t come out of nowhere. Trump’s signing of the “Genesis Plan” provided a strong boost to the market. The plan aims to integrate the US’s supercomputers and unique data assets, using artificial intelligence to accelerate scientific discoveries. The Department of Energy is tasked with establishing an AI experimental platform, and data and infrastructure from federal agencies will also be integrated. In simple terms, the US is making a full-scale push into AI.

Progress has also been reported in Ukraine peace negotiations. US and Ukrainian officials drafted a revised peace framework after talks in Geneva. Although details haven’t been made public, it indicates that both sides are narrowing their differences. Zelensky expressed his welcome for the progress but warned that Russia should not be rewarded for land seized by force.

The most critical signal comes from the Federal Reserve. Governor Waller reiterated support for a rate cut in December, stating that the impact of tariffs on inflation is temporary and that the labor market remains weak. Futures contracts imply about a 70% chance of a rate cut in December. Waller mentioned that three Fed officials appointed by Trump—Boman, Milan, and himself—favor a December cut, and Williams and Cook also lean dovish. In other words, the probability of a rate cut is quite high.

The Seven Giants Rise Collectively, Tech Stocks Reap the Most Profits

The seven major US tech giants all surged. Google rose over 6%, with a market cap of $3.84 trillion, as investor optimism about its AI leadership increased. Tesla gained 6.8%, Apple 1.6%, Amazon 3.2%, Meta 1.6%, and Nvidia 2.1%. Even traditional pharma company Merck was not to be outdone, rising 2.7%, making it the strongest stock on the Dow.

European stocks also followed suit: UK +0.05%, France +0.29%, Germany +0.64%. The China Golden Dragon Index climbed 2.82%.

How Should Investors View This?

Morgan Stanley strategist Michael Wilson believes the recent correction in US stocks is about to end, reaffirming an optimistic outlook for next year’s stock market. The firm favors consumer discretionary, healthcare, financials, industrials, and small-cap stocks. The strategist projects the S&P 500 will rebound to 7,800 points in a year, roughly an 18% increase from current levels.

Deutsche Bank’s research team is even more optimistic, suggesting the S&P 500 could break through 8,000 points by the end of next year. Jim Reid, head of global macro and thematic research at the bank, said that rapid investment and application in AI will continue to dominate market sentiment, and the swift pace of technological progress is expected to translate into substantial productivity gains.

Economic Data Changes

The US Commerce Department announced that the initial Q3 GDP estimate scheduled for October 30 has been canceled due to the government shutdown. The second estimate is also likely to be delayed. The September Personal Consumption Expenditures (PCE) and personal income reports will be released at 10 a.m. Eastern on December 5, delayed from the original October 31.

Notably, Fed Governor Waller mentioned that September employment data might be revised downward, as most private sector data indicate a soft labor market. However, he added that after the December meeting, a large number of delayed economic reports will be released. If inflation or employment suddenly rebounds, or the economy starts to take off, it could raise concerns. He expects the labor market to remain unchanged over the next six to eight weeks.

Investors wanting to monitor inflation trends and their impact on the market in real-time can use tools like inflation calculators, assessing changes in purchasing power based on the latest PCE and CPI data, which is very helpful for formulating investment strategies.

Tech Giants Act Frequently

OpenAI launched a free AI shopping research tool, allowing ChatGPT users to generate personalized shopping guides. Users can describe their needs, and the tool will ask questions in a survey format about budget, color preferences, and sizes, then recommend 10 to 15 products. OpenAI stated that by January next year, almost unlimited access will be available to all free and paid users.

Apple has unusually conducted layoffs, cutting dozens of sales positions. Affected roles include customer managers serving large enterprises, schools, and government agencies, as well as employees operating the Apple Presentation Center. Apple confirmed on Monday that it will reorganize this department.

Amazon Web Services (AWS) announced an investment of up to $50 billion to build and deploy the first customized infrastructure dedicated to AI and high-performance computing for the US government. This will add nearly 1.3 gigawatts of computing capacity across AWS’s security levels, expanding government agencies’ access to AWS infrastructure and AI services.

Commodities and Exchange Rates

WTI crude oil rose 1.57%, trading at $58.8 per barrel. The US 10-year Treasury yield is about 4.03%, down 3 basis points from the previous trading day. The US dollar index fell 0.01%, at 100.1. USD/JPY increased 0.33%, EUR/USD rose 0.07%.

In Hong Kong night market futures, the Hang Seng Index night futures closed at 25,874 points, up 160 points. The China Enterprises Index night futures closed at 9,131 points.

Today’s Important Event Preview

UK November CBI Retail Sales Balance, Alibaba earnings call, US September Retail Sales MoM, US September PPI YoY and MoM, US September FHFA House Price Index MoM, US September S&P/Case-Shiller 20-City Composite Home Price Index YoY, US August Business Inventories MoM, US November Conference Board Consumer Confidence Index, US November Richmond Fed Manufacturing Index, and other key data will be released sequentially.