US Stock Market Rallies as Investors Eye Rate Cuts Amid AI Concerns

Global markets experienced an upswing on Friday, with U.S. equities making notable gains as traders remained optimistic about potential interest rate cuts. The S&P 500 rose by approximately 0.4% during late morning trading in New York, while the NASDAQ 100 climbed roughly 0.5%. The Dow Jones Industrial Average advanced around 0.6%, buoyed by strong performances from major industrial and financial companies. This rally coincided with global benchmarks also trending upward, including a 0.3% increase in the Stoxx Europe 600 and a 0.4% rise in the MSCI World Index.

Traders are increasingly factoring in a Federal Reserve interest rate cut at the bank’s upcoming meeting. Swaps markets now indicate nearly a full quarter-point reduction, reflecting recent comments from Fed officials and soft labor market signals that strengthen the case for looser monetary policy. Analysts believe that even a modest cut would send a significant message regarding the Fed’s willingness to address slowing economic growth.

Technical Outage at CME Adds Uncertainty

The trading day was marked by a brief technical outage at the Chicago Mercantile Exchange (CME), which disrupted futures and options trading early in the session. While the exchange restored most trading activities by mid-morning, the incident contributed to the overall thin liquidity typically observed after a holiday. Many investors treated the post-Thanksgiving period as a partial holiday, making it challenging to draw definitive conclusions from the day’s price fluctuations.

AI-Driven Utility Stocks Face Scrutiny

Despite the overall positive market sentiment, U.S. utility stocks have begun to show signs of fatigue, particularly those linked to AI-driven demand. The S&P 500 Utilities Index is on track for its worst monthly performance since August, following an all-time high reached in October. Investors are now reevaluating whether power producers can scale generation at the pace previously anticipated.

Shares of Constellation Energy have fallen approximately 11% from their October peak, following an earnings call that provided little insight into new capacity associated with data centers. Similarly, Vistra has seen a decline of about 16% since mid-October, influenced by a slowdown in AI-related contract announcements. NRG has also tempered expectations, maintaining guidance where some investors had hoped for upgrades.

Analysts suggest that concerns surrounding an “AI bubble” are increasingly impacting the utility sector. If demand for electricity from AI workloads grows more slowly than projected, utilities that expanded valuations based on aggressive assumptions could be perceived as overvalued. Earlier this year, comments from DeepSeek regarding energy-efficient AI models led to a sharp sell-off in several power stocks, underscoring the risks associated with shifting technology trends.

Despite these recent pullbacks, many utility stocks still exhibit significant year-to-date gains. Companies like Constellation, NRG, and GE Vernova continue to outperform the broader market, suggesting that recent movements may also reflect profit-taking after a substantial rally.

In the currency markets, the Bloomberg Dollar Spot Index declined by 0.2%, extending its recent retreat. The euro traded near $1.1602, while the British pound remained around $1.3249. The Japanese yen strengthened by approximately 0.2% to 156.03 per dollar as traders adjusted their positions in anticipation of U.S. yields.

Bond markets showed only minor fluctuations, with the yield on U.S. 10-year Treasuries rising three basis points to 4.02%. In Europe, Germany’s 10-year yield edged up to 2.69%, while the UK’s 10-year gilt yield held steady near 4.45%.

Commodity markets posted moderate gains, with West Texas Intermediate crude increasing 1.1% to approximately $59.27 per barrel. Traders are closely monitoring the upcoming OPEC+ meeting along with relevant geopolitical developments. Spot gold also advanced 1.1% to roughly $4,204 an ounce following the resumption of futures trading post-CME outage.

In the realm of digital assets, Bitcoin rose by 0.8% to around $92,172, while Ether gained 0.9%, trading near $3,058. The crypto markets reflected a tone of cautious optimism, with traders balancing increased expectations for rate cuts against ongoing concerns about liquidity and volatility as the year draws to a close.