US equities showed signs of further recovery on Tuesday, regaining ground after a rocky start to December.
The S&P 500 rose 0.2%, the Nasdaq Composite added roughly 0.6%, and the Dow Jones Industrial Average gained 0.4%, as markets shrugged off Monday’s losses.
The early December pullback had marked a fragile start to the month, interrupting five-day winning streaks for the three major US indexes and stoking debate over whether a so-called Santa Claus rally will materialise this year.
Investors are weighing the potential for year-end gains against concerns over stubborn inflation, stretched market valuations, and the uncertain returns on heavy AI-related spending.
Bitcoin bounced back as well, rising above $91,000 after tumbling to $84,000 on Monday, its worst day since March. Crypto-linked equities also recovered, with Coinbase and Robinhood posting gains following the previous session’s losses.
Markets are increasingly focused on catalysts that could revive a year-end rally. Economic data is slowly trickling in after delays, giving investors clues on the likelihood of a December interest-rate cut. Despite Monday’s reports that tariffs are weighing on US factory activity, expectations for easing remain high.
Bets on a Fed rate cut ramped up sharply ahead of the central bank’s two-day meeting next week, with markets pricing in an 87% probability of a quarter-point cut on Dec. 10, according to the CME FedWatch tool. The September consumer inflation index, a key gauge for the Fed, is due later this week and is expected to set the tone for policy decisions.
With equities and cryptocurrencies bouncing back, investors are cautiously optimistic but remain alert to risks that could derail a potential Santa rally.
