After a wobbly start, US stocks turned higher on Tuesday, building on Monday’s rebound as markets priced in growing optimism that the Federal Reserve will deliver a rate cut next month.
Markets are now pricing in over an 80% probability of a quarter-point rate cut in December, following comments from Fed governor Christopher Waller advocating easing in rates.
The Dow Jones Industrial Average jumped more than 1.2%, while the S&P 500 rose 0.7%. The tech-heavy Nasdaq Composite shook off an early slide to trade around 0.4% higher. Tech megacaps led the rebound.
Shares of Nvidia came under pressure after The Information reported that Meta is in talks to spend billions on Google’s AI chips. The news challenged Nvidia’s dominance and pushed the stock down as much as 6.5%.
Sticking with AI sentiment, UBS strategists remained optimistic despite elevated valuations. Ulrike Hoffmann-Burchardi of UBS Global Wealth Management said, “We believe that Fed rate cuts, robust corporate earnings, and the AI story will sustain the equity rally into 2026.”
Delayed US data released Tuesday supported sentiment. Retail sales in September rose less than expected, while producer prices increased 0.3% month-over-month, matching forecasts and recovering from August’s decline. Year-over-year PPI rose to 2.7%.
In London, the FTSE 100 finished up 0.8% at 9,609.53, the FTSE 250 gained 1.0% to 21,617.41, and the AIM All-Share rose 0.7% to 742.09. Banking stocks led the gains after reports suggested Chancellor Rachel Reeves is unlikely to impose new taxes on the sector. Lloyds climbed 3.8%, NatWest 3.7%, and Barclays 2.4%.
Beazley fell 9.2% after earmarking $500 million for a Bermuda platform, while Kingfisher surged 6.0% after raising profit guidance to £540–570 million. AO World added 1.5% as guidance hit the top of its expected range, and Baltic Classifieds dropped 2.2% following a JPMorgan downgrade.