Summary
- The S&P 500 jumped 2.3% to 7,549.94, closing in on its 52-week high of 7,844.52.
- The Nasdaq Composite led gains, rising 2.7% to 25,253.14 points.
- Fed Governor Waller said he is leaning toward backing a rate move in December.
Fed Governor Christopher Waller said Tuesday he now considers a December interest-rate cut likely and left open the possibility of a larger half-point reduction, depending on upcoming inflation figures. The remarks gave investors fresh conviction that the central bank is prepared to move more aggressively to support growth, triggering a broad rally across equities.
The S&P 500 climbed 2.346% to 7,549.94, pulling the index back within range of its 52-week high of 7,844.52 and well clear of its yearly low of 6,316.91. The Dow Jones Industrial Average added 2.153% to close at 52,389.75, still short of its record 54,744.33 but far above its 52-week trough of 45,057.28. The Nasdaq Composite outperformed both, gaining 2.741% to 25,253.139, as rate-sensitive technology shares benefited most from the prospect of cheaper borrowing costs ahead.
Waller's comments carry particular weight because they come just ahead of Tuesday's October consumer price index report, a release investors are watching closely to gauge whether the Fed has room to ease further. Economists expect headline CPI to have risen 0.3% for the month, with core inflation, which excludes food and energy, seen climbing 0.2%. A softer-than-expected reading could reinforce the case for a bigger rate cut, while a hotter print could complicate the Fed's path.
Markets have spent much of the year oscillating between optimism over potential rate relief and anxiety over sticky inflation. Tuesday's rally suggests traders are currently leaning toward the optimistic camp, pricing in a greater chance that policymakers will prioritize supporting economic activity over further inflation-fighting caution. A half-point reduction, if delivered, would mark a more aggressive easing step than the quarter-point moves that have characterized recent Fed decisions.
Attention now turns to the inflation data and to any follow-up commentary from other Fed officials in the coming days, which could either confirm or temper the market's current expectations. The central bank's final policy decision of the year is widely anticipated to hinge on how the inflation numbers land, with investors treating Tuesday's gains as an early vote of confidence that borrowing costs are headed lower.