Tech Rally Fuels Broad Market Surge Ahead of Thanksgiving

US stocks opened higher on Monday as tech shares led a rebound into the Thanksgiving holiday week. The S&P 500 and Nasdaq Composite, both up sharply in 2025, continued their gains after a recent pullback. Market optimism was bolstered by strong earnings from tech giant Nvidia, which reported $57.01 billion in revenue for its third quarter.

Investors are closely watching the market's ability to recover amid concerns about a possible AI bubble and uncertainty around the Federal Reserve's December interest rate decision. Futures for the Dow Jones Industrial Average and S&P 500 climbed in overnight trading, signaling optimism as the market prepares for a shortened holiday week.

With the stock market historically performing well during Thanksgiving week, the tone has shifted from caution to cautious optimism.

Seasonality and positioning changes are also playing a role in the current rebound. Citadel Securities' Scott Rubner noted that a recent pullback has created a "healthy" base for a rally into year-end, with retail demand and institutional rebalancing supporting the move according to analyst insights. He expects the S&P 500 to reach 7,000 by the end of the year.

Historical Performance and Investor Sentiment

The stock market has historically outperformed during Thanksgiving week, according to a decade-long analysis. In seven of the last ten years, the S&P 500 and Nasdaq outperformed their annual returns during the holiday week according to market data. This year, with the S&P up 12.3% through Nov. 21 and the Nasdaq up 15.3%, the trend appears to be continuing.

However, the market has faced challenges in recent weeks. November has seen steep declines, with the S&P 500 dropping 3.5% and the Nasdaq Composite down 6.1%. A reassessment of valuations for AI-linked stocks has contributed to the volatility, as investors recalibrate after a strong year of gains. Despite this, the shortened trading week and seasonal trends remain bullish for the market.

Risks and Rate-Cut Uncertainty

The Federal Reserve's December rate decision is a key uncertainty for investors. Recent delays in key employment data have reduced the odds of a rate cut to 33%, according to market expectations. The cancellation of the October employment report and the delayed release of November data means the Fed will lack critical information when making its decision.

Analysts remain divided over the need for a rate cut. Some argue that signs of a cooling labor market justify a cut to avoid a broader slowdown, while others caution against further easing given stalled inflation progress according to market analysis. The debate highlights the complexity of the Fed's balancing act and the uncertainty that continues to cloud the market.

Nvidia's Earnings and Sector Leadership

Nvidia's strong earnings report has reinforced investor confidence in the AI sector. The company's third-quarter revenue of $57.01 billion exceeded expectations, and it reported a 62% year-over-year revenue increase. CEO Jensen Huang noted that demand for the company's AI chips, particularly the Blackwell series, remains strong, with cloud GPUs sold out.

Analysts have raised their price targets for Nvidia, with some predicting significant growth in the coming year. DA Davidson increased its FY2027 EPS forecast to $7.47 from $5.65 and maintained a "Buy" rating with a $250 price target. This sentiment reflects broader optimism about the AI sector's potential and the company's market leadership.

Outlook and Investor Strategy

With the stock market entering the final stretch of the year, investors are navigating a mix of optimism and caution. The potential for a rebound into year-end, supported by strong tech performance and retail demand, is encouraging. However, the uncertainty around the Fed's December decision and the risk of a potential AI bubble remain key concerns.

For now, the market appears to be favoring a cautious bull case, with a focus on tech and seasonal trends. As the holiday week unfolds, all eyes will remain on key data releases and the Fed's policy decisions, which could shape the market's trajectory into year-end.