U.S. Stock Market Ends Week on High Note
U.S. stocks staged a robust rally on Friday, finishing the trading week on a strong note after two subdued sessions. This surge was fueled by a surprisingly mild inflation report and reassuring remarks from Federal Reserve officials, which alleviated concerns over future interest rate hikes.
November also saw an uptick in consumer spending, further underscoring the economy’s steadfastness.
Following these developments, market traders adjusted their expectations, now anticipating an initial Federal Reserve rate cut in March 2025, followed by another in October. Prior to these reports, the odds of a second rate reduction by December 2025 were seen as a coin flip.
Federal Reserve’s Recent Moves and Market Reaction
On Wednesday, the Fed made its third interest rate reduction of the year. However, its economic projections suggested only two 25-basis point cuts in 2025, a decrease from the four cuts projected in September. This adjustment reflects ongoing economic stability and persistent inflation concerns.
This announcement led to a sharp downturn in stock prices late Wednesday, and the markets did not recover on Thursday. Despite Friday’s rally, all three major U.S. stock indexes finished the week in the red.
Supportive comments from Federal Reserve officials also played a role, with some indicating that uncertainties in fiscal policies, including tariffs, were being factored into their economic forecasts.
“The market dynamics are quite clear – the combination of the PCE data and dovish remarks from the Fed counterbalanced the market’s overreaction to the anticipated hawkish cut,” explained Jay Hatfield, CEO at Infrastructure Capital Advisors in New York.
He added, “We’ve witnessed this kind of reaction numerous times in this Fed cycle. The market consistently swings to extremes.”
Weekly and Daily Market Performance
The Dow Jones Industrial Average climbed 498.82 points, or 1.18%, closing at 42,841.06. The S&P 500 increased by 63.82 points, or 1.09%, to settle at 5,930.90, and the Nasdaq Composite rose by 199.83 points, or 1.03%, ending at 19,572.60.
This marked the largest daily percentage gains for the Dow and S&P since November 6. However, for the week, the S&P 500 dropped 1.99%, the Nasdaq fell 1.78%, and the Dow decreased by 2.25%.
The slump ended a four-week winning streak for the Nasdaq, with the S&P 500 experiencing its sharpest weekly percentage decline in six weeks, and the Dow recording its third consecutive weekly drop.
Broad-Based Rally Across Sectors
All 11 major S&P sectors advanced during Friday’s broad rally, led by real estate which saw a 1.8% increase, aided by a dip in Treasury yields.
Small-cap stocks, as represented by the Russell 2000, also benefited from the prospect of lower interest rates, climbing 0.9%.
Attention was also on the U.S. Congress as it rushed to prevent a partial government shutdown before a midnight deadline. Republican leaders in the House of Representatives planned a vote on Friday to keep the federal government operational.
In the stock market, advancing issues outnumbered decliners by a 2.84-to-1 ratio on the NYSE and a 2.12-to-1 ratio on the Nasdaq.
The S&P 500 registered three new 52-week highs and 23 new lows, while the Nasdaq recorded 51 new highs and 233 new lows.
The trading session was also influenced by the concurrent expiration of quarterly derivatives contracts related to stocks, index options, and futures, known as “triple witching,” which typically increases trading volumes.
Trading volumes on U.S. exchanges reached 21.58 billion shares, compared to the average of 14.87 billion over the last 20 trading days.
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Passionate about analyzing economic markets, Alice M. Carter joined THE NORTHERN FORUM with a mission: to make financial concepts accessible to everyone. With over 10 years of experience in economic journalism, she specializes in global economic trends and US financial policies. She firmly believes that a better understanding of the economy is the key to a more informed future.
