Chip Rally Lifts Market as Fed Rate Cut Odds Jump to 63%

US stocks shook off early weakness Friday to close solidly higher—the S&P 500 up +0.98%, Dow up +1.08%, and Nasdaq 100 up +0.77%. Here’s what actually moved the needle:

The Real Catalyst: Fed Pivot Signals

New York Fed Chief John Williams dropped some dovish comments about cutting rates “in the near term,” and the market basically front-ran it. That single comment:

• Tanked 10-year Treasury yields to a 3-week low of 4.03%
• Juiced rate cut odds for December’s FOMC meeting from 35% to 63%

Semiconductor stocks led the charge (GFS +5%, ON +4%, INTC/QCOM/LRCX all +2% or better), betting lower rates = higher valuations for growth plays.

The Headwinds (Still There)

Don’t get too excited—earlier this week tech got hammered over AI spending concerns and stretched valuations. S&P 500 and Nasdaq 100 both touched 2.25-month lows Friday morning. Bitcoin fell another -2% to a 7.25-month low, down 35% from November’s peak. Overseas markets also stumbled: Shanghai -2.45%, Nikkei -2.40%.

The Earnings Cushion

One bright spot: Q3 earnings season wrapping up with 82% of S&P 500 companies beating estimates—best quarter since 2021. Overall earnings up +14.6% vs. +7.2% expected. That’s carrying the market.

Bottom Line: Friday was a relief rally on Fed dovishness, not a new bull signal. Watch if rate cut actually happens Dec 9-10.