US stocks exhibited gains on Friday as investors reacted to a slowdown in inflation, potentially setting the stage for a Federal Reserve rate cut in the coming week. The S&P 500 index rose by 0.19%, approaching its first record close since October. Meanwhile, the Nasdaq Composite climbed approximately 0.3%, positioning itself for its ninth positive close in ten sessions. The Dow Jones Industrial Average also saw an uptick, increasing around 0.2%, following a mixed performance in the prior session.
Investor sentiment regarding a quarter-point interest rate cut from the Federal Reserve next Wednesday is rapidly growing, with the likelihood now sitting at 87%, a significant increase from 62% just a month ago, as reported by CME FedWatch. On the same day, a delayed report regarding the Personal Consumption Expenditures (PCE) price index indicated inflation was rising in line with expectations for September. The core PCE index—considered the Fed’s preferred measure of inflation—edged down to 2.8% year-over-year. In a positive sign for the economy, US consumer confidence also registered its first bounce in five months, as inflation expectations showed signs of easing.
The labor market, however, presented a mixed outlook. A report indicated that US companies eliminated 71,000 jobs last month, marking the most significant job cuts for November since 2022. Conversely, new weekly jobless claims dropped to their lowest levels since September 2022, hinting at a slow, gradual cooling of the labor market rather than a sudden downturn.
In corporate news, Netflix announced it would acquire Warner Bros. Discovery’s studios and streaming division for $72 billion, following a competitive bidding process. This acquisition initially led to a decline in Netflix’s stock, while shares for Warner Bros. Discovery saw a modest increase.
Companies reported mixed earnings as well; Hewlett Packard Enterprise’s stock edged slightly higher despite falling short of expectations that followed a surge related to artificial intelligence developments.
Overall, the S&P 500 managed to secure gains for the second consecutive week, inching closer to record highs. In contrast, bitcoin experienced a downturn, falling below $90,000 for the first time in recent weeks. The world’s leading cryptocurrency is now anticipated to close out the year having decoupled from the stock market for the first time since 2014, currently down about 3% year-to-date compared to the S&P 500’s robust 17% gain.
Gold prices also showed signs of strength, with futures hovering around $4,240, on a path to a weekly gain as anticipation builds around a potential Fed interest rate cut, impacting the US dollar and commodity prices positively.
In other notable news, Tesla launched more affordable versions of its Model 3 and Model Y in Europe as it faced declining sales in the region. Meanwhile, Nvidia’s stock dipped as challenges from China amid increased competition and legislative hurdles continued to mount.
As speculation swirled around the Fed’s next moves following the PCE report, the release of data regarding inflation has heightened expectations for a rate cut. The central bank’s outlook remains a focal point for investors, particularly as issues surrounding consumer sentiment, labor market variables, and corporate developments unfold in real time.
