The Dow Jones Industrial Average closed higher on Tuesday (November 25th) after posting another rally, as traders weighed expectations for a Federal Reserve interest rate cut and the state of artificial intelligence trading.

The blue-chip index gained 664.18 points, or 1.43%, to close at 47,112.45. The S&P 500 rose 0.91% to close at 6,765.88, while the Nasdaq Composite gained 0.67% to end at 23,025.59. This marked a reversal from earlier losses. At its session low, the S&P 500 fell about 0.7%, while the tech-heavy Dow Jones and Nasdaq were down more than 100 points, or 0.2%, and more than 1%, respectively.

Investors continue to monitor any news that could impact the Federal Reserve's upcoming monetary policy decision. The market is pricing in about an 83% chance of a quarter-percentage-point interest rate cut by the Fed in December, according to the CME FedWatch tool.

Expectations rose slightly after Bloomberg reported that White House National Economic Council Director Kevin Hassett is being considered a front-runner to become the next Fed chairman. Hassett is seen by investors as someone more likely to push the central bank toward the low-interest-rate regime favored by President Donald Trump. Treasury Secretary Scott Bessent told CNBC on Tuesday that there is a "very good chance" that Trump will "make an announcement before Christmas."

This probability has increased since New York Fed President John Williams said on Friday that there is room for a rate cut "in the near future."

"Before Friday, the chance of a Fed rate cut was 40%. Now it's 80%. I've never seen such volatility and expectations for a Fed rate cut in the span of a few days. The market is very focused on this issue," said Ron Albahary, chief investment officer at LNW. "I can't predict the future, but it seems like the narrative is pointing to a Fed rate cut on December 10th, which is supporting the Santa Claus rally."

Alphabet was the winner on Tuesday, closing up 1.5% and hitting a new record high, after The Information reported, citing sources, that Meta Platforms was considering spending billions of dollars on AI chips from the Google parent company.

"As computing becomes cheaper, will that increase consumption? Yes, it will likely increase consumption and demand. We're seeing that happen, I think, directly with Meta buying chips from Google," Albahary told CNBC. "I think that bodes well for the broader AI space."

Between MetaTrader reportedly considering a purchase of Alphabet chips and Alphabet's announcement last week of an improved AI model known as Gemini 3, the CIO is confident that the broader economy will benefit from AI. He noted that the potential decline in computing costs could make it easier for non-tech companies to "capitalize on productivity gains and drive revenue growth."

However, with Nvidia falling nearly 3% following the report, investors may take it as a sign that the company's dominance in the AI ​​chip market may be threatened.

"What I'm more concerned about, or thinking about, is the second-order impact on broader players like Microsoft and Amazon," Albahary added. "Is this a moment where you might see a leadership change from Nvidia in the world?"

Alphabet had risen more than 6% the previous day, which also led the Nasdaq to its best day since mid-May. Investors had rallied behind members of the "Magnificent Seven" as well as Broadcom, which are linked through their high-performance application-specific chip (ASIC) business.

Although stocks have recovered from last week's declines, all three US indexes are still down this month, as investors have questioned the valuations of tech stocks. The S&P 500 fell about 1% in November, while the Nasdaq dropped about 3%. The Dow Jones Industrial Average, a 30-stock index, has fallen about 1% this month. (alg)

Source: CNBC.com