(Recasts with preliminary close of trading, adds analyst

comment)

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Alphabet up after report on talks with Meta to supply AI

chips

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Retail sales, producer prices, consumer confidence reports

released

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Kohl's and Abercrombie boost S&P Retail index

By Stephen Culp

NEW YORK, Nov 25 (Reuters) - Wall Street extended its

rally on Tuesday as a spate of economic data appeared to support

the case for the U.S. Federal Reserve to implement its third and

final rate cut of the year in December, while softness in the

tech sector limited the Nasdaq's gains.

All three major U.S. stock indexes closed in positive

territory, with the blue-chip Dow out front. But sagging shares

of artificial intelligence frontrunner Nvidia ( NVDA ) limited

the Nasdaq's advance.

An influx of economic data was released, much of it supporting

views that the Federal Open Market Committee will reduce its key

Fed funds target rate by 25 basis points at its upcoming

monetary policy meeting, but official reports were stale due to

delays related to the recent protracted government shutdown.

The Commerce and Labor departments issued September reports

on retail sales and producer prices, respectively, which showed

spending softened and that inflation continued to cool.

More recent data from the Conference Board showed a

worse-than-expected deterioration of consumer confidence, with

near-term expectations tumbling nearly 12%.

"At the last Fed meeting, (Fed Chair Jerome) Powell pretty

much said (the Fed) would be on hold" at its next meeting due to

a lack of economic data, said Paul Nolte, market strategist at

Murphy & Sylvest in Elmhurst, Illinois. "Then we had Fed

governors speaking and we've gone from 'we're not going to do

anything in December' to 'we need to cut in December because

we're seeing some serious weakening in the job market.'"

Financial markets agree, and are currently pricing in an

84.7% likelihood of that happening, compared with 50.1% a week

ago.

That probability has gained strength in recent days following

dovish remarks by New York Fed President John Williams and Fed

Governor Christopher Waller, among others.

U.S. Treasury Secretary Scott Bessent said there was a good

chance U.S. President Donald Trump will name his pick for

Powell's successor before Christmas, with White House economic

adviser Kevin Hassett widely seen as a likely frontrunner.

"We have an idea who the next Fed chair might be and he's on

the dovish side," Nolte added. "So I think the markets are

feeling pretty good that interest rates are on the way down

throughout 2026."

According to preliminary data, the S&P 500 gained

60.98 points, or 0.91%, to end at 6,766.10 points, while the

Nasdaq Composite gained 154.19 points, or 0.67%, to

23,026.19. The Dow Jones Industrial Average rose 665.94

points, or 1.43%, to 47,114.21.

While softer-than-expected retail sales data and the dour

consumer confidence reading raised concerns over the health of

the consumer, a smattering of generally positive retail earnings

gave a boost to the S&P 500 retail index.

Department store chain Kohl's and clothing retailer

Abercrombie & Fitch ( ANF ) surged after the companies hiked

their annual earnings forecasts.

But Burlington Stores ( BURL ) tumbled after third-quarter

revenue missed estimates.

Alphabet's shares gained after the Information

reported Meta Platforms was in discussions to use

Google's AI chips in its data centers from 2027 and rent chips

from Google Cloud by next year.

U.S.-listed shares of Alibaba slipped despite the

Chinese e-commerce firm's quarterly revenue beat.

Cryptocurrency exchange shares Coinbase and

Strategy Inc ( MSTR ) both dipped in the face of ongoing bitcoin

weakness.