Stocks Extend Year-End Rally as Fed’s Softening Tone and Fresh Liquidity Push Markets Higher

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Stocks rallied into the close Monday as investors digested a quietly accommodative Federal Reserve decision and improving consumer-spending signals, extending a year-end upswing that has accelerated across major U.S. equity benchmarks.

The Dow Jones Industrial Average climbed +497.46 points (+1.05%) to Not provided, leading blue-chip gains. The S&P 500 rose +46.22 (+0.68%), while the Nasdaq Composite added +77.67 (+0.33%). Small caps continued their recent rebound, with the Russell 2000 rising +3.45 (+1.37%).

The move unfolded as markets continued to parse the Federal Reserve’s 25-basis-point rate cut, which lowered the policy range to 3.50%–3.75%, according to the Fed policy summary in the provided document. While the cut was fully expected, the broader message leaned more supportive for risk assets than many traders anticipated. The Fed’s updated projections kept the forward rate path unchanged, trimmed inflation forecasts, and raised growth expectations, signaling to investors that policymakers remain comfortable with a gradual glide path toward neutral.

Internal tensions remain at the Fed: the vote split 9–3, with Stephen Miran preferring a larger 50-basis-point cut and Austan Goolsbee and Jeffrey Schmid favoring no cut. Yet markets interpreted the divergence as confirmation that policymakers are navigating a narrow but constructive path—supporting employment without reigniting inflation, while avoiding any hint of a hawkish pivot.

More consequential for markets was the Fed’s decision to begin Treasury bill purchases of roughly $40 billion starting December 12, a liquidity-positive action described as not quantitative easing but functionally similar in its effect on reserves. This shift, alongside the removal of certain repo-operation limits, contributed to suppressed volatility: the CBOE Volatility Index (VIX) fell 7.27% to 15.70, its lowest closing tone in weeks.

Commodities offered a mixed backdrop. Crude oil (Jan 26) rose 1.18% to 58.94, while gold (Feb 26) advanced 0.68% to 4,265.00, both reflecting a softer dollar and easier financial-conditions impulse following the Fed meeting. Bitcoin slipped 0.46% to 92,685.45, retracing part of last week’s rapid ascent.

Consumer-spending data from the Bank of America Institute, as provided in your document, showed a widening divergence between high- and low-income households—a “K-shaped” holiday pattern.

Higher-income households increased spending on holiday items materially more than lower-income groups, consistent with stronger after-tax wage growth at the top of the income distribution. Still, overall card spending per household rose 1.3% year-over-year in November, signaling durable, if moderating, consumer resilience.

With liquidity returning, volatility easing, and the growth-inflation mix improving, investors continued to lean into risk exposure Monday afternoon. The market’s tone suggests that the Fed’s “boring but bullish” message remains the dominant force shaping trading into year-end.