(MENAFN) U.S. equity markets staged a decisive recovery Tuesday, shaking off December's turbulent opening session to close firmly in positive territory.

The Dow Jones Industrial Average surged 185.13 points, gaining 0.39 percent to settle at 47,474.46. The S&P 500 edged up 16.74 points, or 0.25 percent, to 6,829.37, while the Nasdaq Composite jumped 137.75 points, advancing 0.59 percent to 23,413.67. Both the Dow and S&P 500 temporarily slipped below breakeven mid-session, and the Nasdaq flirted with the flatline before rallying.

Sector performance painted a mixed picture, with eight of eleven major S&P 500 sectors finishing in the red. Energy and materials bore the brunt of selling pressure, tumbling 1.28 percent and 0.82 percent respectively. Conversely, industrials and technology emerged as top performers, climbing 0.87 percent and 0.84 percent respectively.

Following November's choppy performance, investors are hunting for catalysts to fuel a traditional year-end rally. Market sentiment has pivoted sharply toward anticipating a Federal Reserve interest rate reduction on December 10, with traders now pricing in approximately 89 percent odds of such action—a dramatic increase from mid-November expectations, according to the CME FedWatch tool.

"Markets appear to have moved away from uncertainties surrounding Fed policy and the Dec. 10 FOMC (Federal Open Market Committee) and focusing instead on better-than-expected earnings projections for the fourth quarter and calendar year 2026, in addition to looking beyond the economic soft patch we're currently experiencing to growth accelerating later next year," said Doug Beath, global equity strategist at Wells Fargo Investment Institute. "Seasonality also favors stocks in December, particularly after a weak November."

The ten-year U.S. Treasury yield hovered near 4.09 percent after Monday's jump from Friday's 4.01 percent close.

On the corporate front, Nvidia added 0.86 percent, building on Monday's momentum following news of an expanded partnership and $2 billion investment in Synopsys. Most Magnificent Seven constituents posted modest gains except Tesla, while Intel rocketed 8.65 percent higher.

Historical patterns favor continued strength, with the S&P 500 averaging gains exceeding 1 percent during December, per the Stock Trader's Almanac. Strategists at BNP Paribas forecast the S&P 500 reaching 7,500 by year-end 2025, underpinned by sustained U.S. economic expansion driving corporate earnings growth while preventing significant labor market deterioration.

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