Global Markets Rally on Rate Cut Hopes
Global equity markets showed strong gains on Wednesday, December 4, 2025, as investors doubled down on expectations of further Federal Reserve rate cuts in the coming months. Major U.S. indices traded higher, with the S&P 500 and Nasdaq Composite both posting solid gains, while the Russell 2000 outperformed over the session, reflecting a broad rotation into smaller-cap and more rate-sensitive stocks. Sentiment was supported by fresh labor market data that reinforced the view that inflation is cooling and the Fed can afford to continue easing monetary policy.
Bond yields edged lower across the curve, particularly in the front end, as traders priced in a high probability of another rate cut at the December FOMC meeting and at least two more cuts in 2026. The 2-year Treasury yield declined, while the 10-year yield also pulled back slightly, signaling growing confidence that the Fed’s tightening cycle is firmly over and a new easing phase has begun. This shift in the yield curve helped lift risk assets, especially growth and technology names, which benefit from lower discount rates.
Dollar Weakens to Multi-Week Lows
The U.S. dollar weakened significantly against most major currencies, marking its worst day in about seven weeks. The Bloomberg Dollar Spot Index fell to its lowest level since late October, driven by fading expectations of aggressive Fed tightening and stronger relative growth prospects in other regions. The euro gained notably, rising above 1.16 against the dollar, while the Japanese yen and several commodity-linked currencies also strengthened.
Emerging market currencies broadly benefited from the dollar’s retreat, easing pressure on external debt and import costs. Commodity prices, particularly oil and industrial metals, held firm or rose modestly, supported by a weaker dollar and steady global demand. Gold also advanced, as lower real yields and safe-haven demand continued to underpin the precious metal.
Fed Chair Speculation and Policy Outlook
Markets remained focused on the upcoming leadership transition at the Federal Reserve, with investors closely watching how the choice of the next Fed chair might influence the pace and timing of future rate cuts. While there is some debate about the exact path, the consensus view among strategists is that the Fed will deliver at least one more cut in December and two additional cuts in 2026, regardless of who leads the central bank.
Recent economic data, including softer-than-expected ADP private payrolls and other labor market indicators, have reinforced the narrative of a gradually cooling economy that can tolerate lower rates without reigniting inflation. Policymakers are also increasingly acknowledging that AI and other productivity-enhancing technologies may have a disinflationary effect over the medium term, which could allow for a more accommodative stance.
Tech Earnings: Nvidia Holds, Snowflake Disappoints
In corporate news, technology earnings provided a mixed picture. Nvidia reported solid results that largely met or exceeded expectations, with strong demand for AI chips continuing to drive revenue and margins. The stock held up well in after-hours trading, supported by management’s upbeat commentary on data center growth and international expansion, including ongoing efforts to navigate export controls in China.
On the other hand, Snowflake delivered a disappointing earnings report, with slower-than-expected AI adoption and intensifying competition weighing on guidance. Shares plunged in after-hours trading as investors questioned the company’s ability to maintain its growth trajectory in a crowded cloud data analytics market. The divergence between Nvidia and Snowflake highlighted the ongoing market scrutiny of which tech firms are truly benefiting from the AI boom versus those facing margin pressure and saturation.
Retail and Consumer Data
Retail sales data and early indicators from major chains offered a nuanced view of consumer health. Costco reported a slight miss in North American same-store sales, with U.S. performance lagging behind international markets. The results suggested some softening in discretionary spending, particularly in certain regions, though overall traffic and membership metrics remained resilient.
Other retailers and consumer-facing companies are preparing to report full quarterly results in the coming days, and investors are watching for signs of inflation’s impact on household budgets, especially in food and essential goods. Early forecasts for 2026 suggest food price inflation could remain elevated in several markets, which may continue to pressure lower- and middle-income consumers and influence central bank thinking.
Geopolitical and Policy Developments
On the geopolitical front, French President Emmanuel Macron pushed for deeper Chinese investment during a high-level meeting with Chinese President Xi Jinping, signaling Europe’s interest in maintaining economic ties despite broader U.S.-China tensions. The discussions touched on trade, technology, and climate cooperation, with both sides emphasizing the importance of stable and predictable economic relations.
Meanwhile, U.S. business leaders reiterated their support for the USMCA trade agreement, highlighting its role in supporting North American supply chains and investment. These developments come amid ongoing debates about industrial policy, tariffs, and the global allocation of capital, all of which continue to influence market sentiment and sector rotation.
Outlook for the Final Weeks of 2025
As the year draws to a close, markets are likely to remain focused on central bank policy, inflation trends, and earnings quality, especially in the technology and consumer sectors. The combination of a weaker dollar, falling yields, and strong rate-cut expectations has created a favorable backdrop for risk assets, but volatility could increase if economic data or corporate guidance deviate from consensus.
Investors are also positioning for 2026, with many strategists recommending a balanced approach that maintains exposure to mega-cap tech while adding select value and international names. The key risks ahead include a sharper-than-expected slowdown in major economies, renewed inflation pressures, and geopolitical flare-ups that could disrupt trade and energy markets.