Wall Street extended its winning streak on Wednesday, with major indexes climbing higher as investors looked past Microsoft’s artificial intelligence turbulence and focused instead on growing expectations for Federal Reserve rate relief next week.
The Dow Jones Industrial Average added 208 points, or 0.4%, while the S&P 500 edged up 0.1%. The tech-heavy Nasdaq Composite slipped 0.1%, weighed down by concerns about enterprise AI adoption. More than 300 stocks in the S&P 500 advanced, signaling broad-based market strength.
Fed Rate Cut Hopes Fuel Rally
Markets are pricing in an 85-88% probability that the Federal Reserve will cut interest rates at its final policy meeting of 2025 next week.
This optimism drove the dollar lower against all major currencies and provided support for equities despite mixed signals from the technology sector.
The anticipated rate cut comes as investors weigh the central bank’s dual mandate of maintaining price stability while supporting maximum employment. Recent economic data has done little to shake market confidence in the Fed’s dovish pivot.
Microsoft AI Controversy Creates Volatility
Microsoft shares experienced a volatile session after reports emerged that the tech giant was reducing AI software sales quotas, sparking concerns about sluggish enterprise demand for artificial intelligence products. The stock initially plunged nearly 2% on the news.
However, Microsoft quickly moved to contain the damage, denying it had lowered sales quotas for its sales force.
The company’s pushback helped the stock pare roughly half its losses by midday, though the episode raised questions about whether the AI boom is meeting resistance in corporate boardrooms.
The uncertainty rippled through the tech sector, with several AI-related stocks coming under pressure as investors reassessed the pace of enterprise AI adoption.
Marvell Technology Shines with Acquisition, Earnings Beat
Providing a bright spot for the semiconductor sector, Marvell Technology emerged as one of the day’s standout performers after announcing two major developments.
The chipmaker revealed plans to acquire Celestial AI for at least $3.25 billion, a deal aimed at strengthening its position in AI infrastructure.
Additionally, Marvell reported third-quarter earnings that exceeded Wall Street expectations, sending its stock surging and offering a counterpoint to the AI demand concerns sparked by the Microsoft news.
Bitcoin Bounces Back
In cryptocurrency markets, Bitcoin rebounded above the $90,000 threshold after tumbling on Monday. The recovery suggests continued resilience in digital assets despite recent volatility, with investors viewing the dip as a buying opportunity.
Looking Ahead
All eyes now turn to next week’s Federal Reserve meeting, where policymakers are widely expected to deliver another rate cut.
The decision could set the tone for markets heading into the final weeks of 2025, particularly as investors assess whether the central bank will signal additional easing in the year ahead.
For now, the market’s ability to shrug off negative headlines and focus on the Fed’s supportive stance suggests investor confidence remains intact, even as questions about AI’s near-term growth trajectory introduce fresh uncertainty into the technology sector.
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