Dow gains almost 500 points, S&P 500 ends shy of record high after Fed’s final rate cut of 2025 bolsters case for early start to ‘Santa Claus rally’

Core Viewpoint - The Federal Reserve's decision to cut rates has boosted investor confidence, leading to significant gains in major stock indices, with the S&P 500 nearing a record close and the Dow Jones Industrial Average rising almost 500 points [1][2][3]. Group 1: Market Performance - The Dow Jones Industrial Average rose by 497.46 points, or nearly 1.1%, closing at 48,057.75, marking an almost one-month high [2]. - The S&P 500 increased by 46.17 points, or 0.7%, finishing at 6,886.68, just shy of its record close of 6,890.89 reached on October 28 [2]. - The Nasdaq Composite lagged behind, gaining 77.67 points, or 0.3%, to close at 23,654.16, the highest level since November 3 [2]. Group 2: Investor Sentiment - The Fed's rate cut has reinforced investor optimism regarding the ongoing three-year rally in stocks, despite concerns over inflation, the U.S. deficit, and a weakening labor market [3]. - Strong corporate earnings growth, the potential of AI, and anticipated stimulus from President Trump's tax and spending package are seen as factors that could further support the market rally [4]. Group 3: Future Outlook - Some market participants are speculating on the possibility of further Fed easing under Kevin Hassett, a likely successor to Fed Chair Jerome Powell, contributing to a cautiously bullish market tone [5]. - Experts suggest that while lower interest rates are beneficial, the expected cascading effect of multiple cuts has not materialized [6][7]. - The upcoming release of delayed economic data could reveal weaknesses in the labor market or persistent inflation, which may impact market performance [6].