To The Moon

Equities Extend Gains as Rate-Cut Confidence Builds

Markets continued their steady climb on Wednesday as investors grew increasingly confident that the Federal Reserve will cut interest rates at next week’s policy meeting. The $S&P 500(.SPX)$ rose 0.3%, pushing the index within 0.6% of an all-time high. The Dow Jones gained 0.9%, while the $NASDAQ(.IXIC)$ edged up 0.2%. $Alphabet(GOOGL)$ $Tesla Motors(TSLA)$ $Palantir Technologies Inc.(PLTR)$

Stocks

Small caps were a standout: the Russell 2000 surged 1.9%, reflecting growing optimism that easier monetary conditions could breathe life into the most rate-sensitive parts of the market.

But the most important signal of the day came from a more traditional bellwether.

Sector and Stock Highlights

• Top Gainer: $Microchip Technology(MCHP)$ +12.2%

• Top Decliner: Alexandria Real Estate Equities -10.1%

• Best Sector: Energy

• Worst Sector: Technology

The sector divergence underscores a rotation toward cyclicals and real-economy names as expectations for monetary easing rise.

Transportation Stocks Flash Bullish Economic Signal

The Dow Jones Transportation Average jumped 2%, notching its eighth consecutive gain, the longest winning streak since October 2021. The index, which includes key U.S. movers of goods and passengers such as UPS, FedEx, Delta Air Lines, J.B. Hunt, and Uber, is widely viewed as a forward-looking gauge of economic health.

Under Dow Theory, a sustained bull market requires both the industrials and the transports to rise together, on the logic that manufacturers’ success must be confirmed by the companies delivering their goods. With both averages now climbing in tandem, the market is signaling improved conviction in economic momentum heading into year-end.

The move also aligns with strength in cyclical sectors: Energy led the session (+1.8%), while Technology lagged modestly after recent gains.

Labor Market Softens, Strengthening the Case for a Fed Cut

The primary catalyst behind Wednesday’s optimism was the ADP private payrolls report, which showed the U.S. economy lost 32,000 private-sector jobs in November. Economists had expected a gain, making the decline a meaningful downside surprise.

Jobs

Since the government shutdown blocked the Bureau of Labor Statistics from collecting and releasing official payroll and unemployment data, ADP’s report has taken on unusual importance. With the Fed starved of traditional labor market inputs, Wednesday’s reading becomes a de facto guidepost for policymakers.

• Fed rate-cut odds climbed to ~89%, per CME FedWatch.

FED

Looking Ahead

A busier earnings slate arrives, with results due from:

• Dollar General

• Ulta Beauty

• SentinelOne

• Kroger

• Brown-Forman

• Docusign

• TD Bank

Investors will also continue watching for any data that might sway the Fed’s calculus before next week’s meeting.

Conclusion: Markets Lean Into the Fed Pivot

As the countdown to the December Federal Reserve meeting accelerates, markets are behaving increasingly as though a rate cut is all but assured. The combination of softening labor data, a synchronized rise in both industrials and transports, and strong appetite for cyclicals is fueling a classic pre-pivot rally.

For now, the market is signaling optimism, but the Fed will determine whether this rally has further room to run…

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This summary is for informational purposes only and does not constitute financial advice. Investors should conduct their own research before making investment decisions.

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