Markets Hold Steady as Crypto Rebounds and Tech Leads Gains

Stocks edged higher Tuesday, recovering modestly after a rough start to December. A sharp rebound in Bitcoin and strength across megacap tech firms helped offset broader weakness under the surface, with most S&P 500 constituents finishing in the red. Treasury yields and the U.S. dollar remained stable, while oil extended its decline. Despite lingering concerns over valuations and Fed policy, market sentiment remains cautiously optimistic heading into key economic data and next week’s rate decision.

Key Headlines & Market Movers:

• Narrow Equity Advance as Megacaps Drive Index Higher: The S&P 500 notched its sixth gain in seven sessions, but breadth was weak. Apple and Nvidia led the charge, while Tesla slipped after Michael Burry criticized its valuation. Boeing surged 10% on news it expects to generate cash again in 2026 as aircraft deliveries ramp. Smaller caps underperformed, with the Russell 2000 dipping. While the technical setup is constructive, strategists note the market may need to consolidate further before making new highs.

Bitcoin Bounces After Flash Crash, But Sentiment Fragile: Bitcoin rebounded over 5% to trade above $91,000, recovering from a steep overnight drop below $85,500 that wiped out nearly $1B in leveraged positions. The recovery boosted crypto-tied stocks like Coinbase, MicroStrategy, and Marathon Digital. However, the quick reversal underscores ongoing volatility and fragile sentiment in the digital asset space.

• Fed Outlook Clouded by Division Ahead of December Cut: Markets remain confident the Fed will cut rates next week, but expectations are shifting toward a “hawkish cut.” The Fed’s internal divide over the long-term rate path is at its widest in over a decade, raising questions about how aggressive easing will be in 2026. JPMorgan warns that Treasuries may underperform next year if markets have overestimated the pace of cuts, with nearly four already priced in.
• AI and Consumer Resilience Continue to Anchor Bullish Thesis: Despite rate and valuation headwinds, ongoing AI investment and strong consumer spending are seen as tailwinds for equities. Strategists at 22V Research caution against shorting the market without a clearer sign of economic deterioration. Recent gains in cloud and AI hardware names, such as Nvidia, AMD, and MongoDB, reinforce this narrative, while Amazon and Vultr push further into chip development to rival Nvidia.

S&P 500 Sector Performance

Looking Ahead

With the Fed’s December meeting just a week away, markets are treading cautiously, watching upcoming economic data for confirmation of a soft landing. Expect volatility to remain elevated as investors weigh rate cut timing, earnings from key tech names, and macro crosscurrents heading into year-end.

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