Wall Street Rises as Traders Anticipate December Rate Cut

Wall Street’s main indexes experienced modest gains on Friday as traders increased their expectations for an interest rate cut by the Federal Reserve in December. This shift followed comments from policymakers that indicated the central bank may lower rates without jeopardizing its inflation targets.

John Williams, President of the New York Fed and a voting member of the Federal Open Market Committee, stated that the bank could consider cutting rates “in the near term.” This sentiment has led traders to assign over a 70% probability to a potential 25 basis points rate reduction in December, a significant rise from around 37% earlier on Friday, according to the CME FedWatch Tool.

Contrarily, Susan Collins, President of the Boston Fed, expressed a different view during an interview on CNBC, asserting that current policy is “in the right place.” Her comments suggest skepticism regarding the necessity for additional rate cuts, a stance that may contribute to increased market volatility in the lead-up to the Fed’s December meeting.

Market Performance and Sector Movements

Market analysts, including John Campbell, head of the systematic core equity team at Allspring Global Investments, noted that expectations for a continued rate-cutting cycle remain strong, whether it occurs in December or early next year. Campbell mentioned, “There could be some volatility around December’s cut, but the rate-cutting cycle will probably still continue into next year.”

As traders processed the latest economic indicators, Wall Street’s major indexes showed positive movement. At 09:49 a.m. ET, the Dow Jones Industrial Average climbed 68.12 points, or 0.14%, to reach 45,817.68. The S&P 500 gained 19.13 points, or 0.29%, closing at 6,557.68, while the Nasdaq Composite increased 53.76 points, or 0.24%, bringing it to 22,131.10.

Most large-cap and growth stocks saw gains, with Alphabet leading the way with a 4% increase. Additionally, Eli Lilly rose 1.3%, marking a milestone as the first drugmaker to achieve a market capitalization of $1 trillion. In contrast, Nvidia experienced a decline of 0.4% after a volatile trading session on Thursday, where shares had fluctuated as much as 5% before closing down 3.2% following its third-quarter results.

Analysts observed that stock valuations have become stretched, leading some investors to consider selling. Campbell noted, “Expectations have gotten very high for the AI theme.”

Sector Analysis and Economic Indicators

Despite the upward trend in major indexes, the S&P 500 and Nasdaq were on track for their worst weekly performance since March, with sectors such as consumer discretionary and information technology facing substantial declines. The Nasdaq has notably pulled back from its October high, indicating a potential sharp drop in November amid concerns over technology monetization, ongoing spending within the sector, and rising debt issuance.

Market participants were also analyzing the November business report, which indicated a slowdown in factory activity to a four-month low, attributed to increased prices driven by tariffs.

On a positive note, Intuit reported a 4.1% increase after the financial management tools company projected second-quarter revenue growth that surpassed market expectations.

Overall, advancing issues outnumbered decliners on the New York Stock Exchange by a ratio of 1.82-to-1 and by 1.61-to-1 on the Nasdaq. The S&P 500 recorded four new 52-week highs and four new lows, while the Nasdaq Composite reported five new highs alongside 191 new lows.

As the financial landscape continues to evolve, traders remain vigilant, monitoring signals from the Federal Reserve and economic indicators that could shape the investment climate in the coming months.