Fed Daly's December Rate Cut Support: Market Impact & Probability Analysis

Fed Governor Mary Daly’s comments (alongside Williams and Waller) solidified expectations for a December rate cut [1], [6]. Market probabilities of a 25bp cut range from 81% (Nasdaq) to 87% (AOL) [2], [3], [4], [5]. On Nov 24, major indices rose: S&P500 (+1.03%), Nasdaq Composite (+1.73%), Dow Jones (+0.17%) [0]. Sector performance showed energy leading (+1.76%) and healthcare lagging (-0.12%) [0]. The tech-heavy Nasdaq outperformed due to rate cut sensitivity, though the broader tech sector gained only +0.15% [0].

• Rate cut probability surged from 30% to 85% in one week, indicating rapid sentiment shift [5].
• Nasdaq’s outperformance contrasts with moderate tech sector gains, suggesting large-cap tech drove index results [0].
• SocGen’s bubble warning aligns with Reddit’s concerns about AI bubble risks from rate cuts [4].

• Risks
  : Aggressive rate cuts could spark valuation bubbles (SocGen) [4]; labor market fragility may impact long-term growth.
• Opportunities
  : Lower rates support growth assets (Nasdaq) and energy projects; gold prices benefit from non-interest-bearing asset demand [5].

• Fed December meeting: Dec 10 [3].
• Rate cut probabilities: 81% (Nasdaq) to 87% (AOL) [2-5].
• Nov24 market: Nasdaq (+1.73%), energy (+1.76%), tech (+0.15%) [0].