Nasdaq recovers all of last week's loss after best day since May led by Alphabet

US markets came roaring back to start the truncated week on a positive note led by a return of the AI trade. The S&P 500 and Nasdaq outperformed the Dow Jones, which also ended higher.

The S&P 500 gained 1.5%, its best single-day gain in six weeks, while the Nasdaq surged 2.7%, exactly what it lost last week, to report its best single-day gain since May 12. The Dow ended higher by 200 points, but underperformed its peers.

Gains on the S&P 500 and Nasdaq were led by Alphabet, which surged 6%, extending its gains after the launch of Gemini 3. The gains in Alphabet reflected in other tech names as well, with shares of Broadcom rising as much as 11%, while those of Tesla, Nvidia, Apple, AMD, also surged between 3% to 7% on Monday.

US equities staged a reversal last Friday after a brutal sell-off in the early part of the week as New York Fed President John Williams called for a near-term rate cut that spurred sentiment. Williams' remarks last week were supported by Fed Governor Christopher Waller on Monday, who called for a rate cut in December, and then take a meeting-by-meeting approach, as there will be a flood of delayed economic data for the Fed to deal with.

With two major Fed officials clamoring for a cut in interest rates, contrary to earlier officials remarking about keeping rates unchanged, the probability of the US Fed cutting interest rates in December has now risen to 81%, according to the CME FedWatch tool.

UBS Securities’ trading desk now thinks the selloff in US stocks may have run its course, especially with expectations for the Fed lowering rates next month seemingly back on track.

The truncated week also means that there will be some delayed economic data reported over the next two days as well. Today's session would see delayed retail sales and Producer Price Inflation (PPI) data for the month of September, along with data on durable goods orders. The Bureau of Labor statistics has announced that the jobs report for October and November will be released simultaneously on December 16, while the November CPI data will be released on December 18, after the Fed policy.

The US Dollar index remains above the mark of 100, while Gold prices are back above the $4,100 an ounce mark, as the case for a rate cut grows louder.