U.S. stocks experienced upward movement on Friday as Wall Street reacted to a slowdown in inflation, indicated by the Federal Reserve’s preferred gauge. The S&P 500 rose by 0.5%, bringing it close to a new record high. Similarly, the Nasdaq Composite gained 0.7%, marking its ninth positive close out of ten sessions, while the Dow Jones Industrial Average also saw a 0.5% increase after a mixed performance on Thursday.
Market participants leaned heavily toward the possibility of a quarter-point interest rate reduction by the Federal Reserve during its next meeting, scheduled for Wednesday. According to the CME FedWatch, traders assigned 87% odds to this move, a significant increase from 62% just a month prior.
A delayed report on the Personal Consumption Expenditures (PCE) price index revealed that inflation had risen in September as anticipated, with the core PCE index—the Fed’s preferred inflation measure—cooling to a 2.8% annual increase. In another positive development, U.S. consumer confidence saw its first improvement in five months, driven by eased inflation expectations.
However, the labor market data presented a mixed narrative. A report indicated that U.S. companies cut 71,000 jobs last month, marking the most severe November decline since 2022. Contrarily, new jobless claims dipped to their lowest level since September 2022, suggesting a gradual cooling of the labor market rather than a steep decline.
In corporate news, Netflix announced its acquisition of Warner Bros. Discovery’s studios and streaming unit for a staggering $72 billion, ending a competitive bidding process. Following the news, Netflix’s stock fell slightly, while shares of Warner Bros. Discovery saw a 3% increase.
On the earnings front, Hewlett Packard Enterprise’s stock dropped over 3% after the company’s quarterly sales outlook fell short of heightened expectations fueled by the AI market.
Consumer sentiment made a surprising jump at the beginning of December, with the University of Michigan’s Index of Consumer Sentiment registering a reading of 53.3, surpassing expectations of 52 and improving from November’s 51. Respondents expressed reduced concerns over price increases, with inflation expectations for the next year declining to 4.1% from 4.5% in the previous month.
The PCE price index for September showed overall inflation holding steady, rising by 0.3% month-on-month, in line with previous increases. Additionally, personal income increased by 0.4% and spending grew by 0.3%, both aligning with forecasts.
The labor market remains difficult to interpret, characterized by varying signals. Unemployment insurance claims have hit a three-year low, signaling resilience amidst ongoing layoffs and restructurings. Experts urge caution, noting that seasonal fluctuations can distort labor data this time of year.
The stock market opened positively with the S&P 500 up 0.3%, the Nasdaq climbing 0.4%, and the Dow increasing by nearly 0.2% as investors awaited key economic data.
In bond markets, Treasurys were poised for their worst week in six months as inflation figures loomed. The 10-year yield reached 4.12%, its highest since June, while the 30-year yield climbed to 4.78%, its highest since September.
Victoria’s Secret’s stock surged by over 13% premarket after the company raised its 2025 sales and earnings guidance, showcasing progress in its turnaround efforts. Despite facing challenges, including estimated tariff impacts lower than expected, the company’s third-quarter results surpassed estimates.
Meanwhile, BlackRock’s iShares Bitcoin Trust has seen substantial outflows, totaling $2.7 billion over five weeks. This trend highlights a weakened institutional interest in Bitcoin, coinciding with a broader downturn in the cryptocurrency market.
Concerns also emerged for Nvidia as Google announced plans to potentially sell its own AI chips, raising competitive fears as major clients look to diversify their suppliers.
Overall, the stock market’s upward trajectory appears contingent upon forthcoming economic indicators and the Federal Reserve’s policy decisions, as investors navigate a landscape marked by mixed signals across various sectors.
