Why does the stock market care so much about a rate cut?

Traders work on the floor of the New York Stock Exchange (NYSE) in New York on December 8, 2025. Investors will search for clues this week on next year's interest-rate path as they look beyond an all-but-certain cut at the Federal Reserve's final meeting of 2025. Michael Nagle/Bloomberg/Getty Images New York —

Just a few weeks ago, the stock market stumbled over fears that artificial intelligence stocks might be in a bubble . Now stocks are back within reach of a record high.

Thank the Federal Reserve.

The market has rebounded from a dip in early November as investors have leaned into bets that the Fed will cut interest rates this week at its last policy meeting of the year.

Interest-rate cuts can boost stocks by lowering savings rates and borrowing costs for individuals and b