Sometimes the market and investor sentiment move in completely opposite directions, and Monday was a perfect example. While U.S. stocks posted solid gains—with the Nasdaq leading the charge with a roughly 600-point surge—the CNN Money Fear and Greed Index stayed firmly planted in "Extreme Fear" territory.
The rally came courtesy of dovish signals from Federal Reserve officials over the weekend and Monday. New York Fed President John Williams kicked things off Friday, followed by Governor Christopher Waller on Monday, triggering a swift repricing of interest rate expectations. According to CME Group's FedWatch tool, traders now see an 80.9% chance of a 25-basis-point rate cut at the December 10 Federal Reserve meeting. That's up dramatically from 71% on Friday and a mere 25% just one week ago.
The major indexes all finished in the green. The Dow Jones gained about 203 points to close at 46,448.27. The S&P 500 rose 1.55% to 6,705.12, while the Nasdaq Composite jumped 2.69% to end at 22,872.01.
Alphabet Overtakes Microsoft in Market Cap Race
Among the Magnificent Seven tech giants, Alphabet Inc. (GOOGL) was the standout performer with a 6.3% gain. The rally pushed Alphabet's market capitalization above Microsoft Corp. (MSFT), making Google's parent company the world's third-largest publicly traded company.
Tesla Inc. (TSLA) also had a strong showing, soaring nearly 7% after CEO Elon Musk announced Sunday that the company plans to design and deploy "several million AI chips" across its vehicle fleet and data centers.
Broad-Based Rally With Notable Exceptions
Most S&P 500 sectors closed higher, with communication services, information technology, and consumer discretionary stocks posting the biggest gains. However, consumer staples and energy stocks bucked the trend, finishing the session in negative territory.
On the economic data front, the Dallas Fed's general business activity index for Texas manufacturing slipped to -10.4 in November from -5 in the prior month, signaling continued weakness in regional manufacturing.
Fear Index Remains Stubbornly High
Despite Monday's rally, the CNN Business Fear & Greed Index tells a different story about investor psychology. The index registered 13.9, up slightly from Friday's reading of 12.1, but still firmly in "Extreme Fear" mode.
The Fear & Greed Index measures current market sentiment based on seven equal-weighted indicators. It operates on the premise that excessive fear tends to depress stock prices, while greed pushes them higher. The index ranges from 0 to 100, where 0 represents maximum fear and 100 signals maximum greed.
Looking Ahead
Investors are turning their attention to upcoming earnings reports from HP Inc. (HPQ), J M Smucker Co. (SJM), and Alibaba Group Holding Ltd. (BABA).