New York, Sept 14 — U.S. stocks wrapped up a remarkable week with substantial gains, fueled by rising expectations for a significant interest rate cut by the Federal Reserve.
On Friday, the S&P 500 (^GSPC) advanced 0.5%, while the Nasdaq Composite (^IXIC), known for its tech-heavy index, increased by 0.7%. This marked the fifth consecutive day of gains for both indices, reflecting a notable rebound in technology stocks. The Dow Jones Industrial Average (^DJI) rose 0.5%, adding approximately 300 points.
For the week, the Nasdaq surged more than 5%, marking its strongest weekly performance of the year. The S&P 500 climbed 4%, and the Dow gained 2%. These gains came as Wall Street navigated recent volatility and engaged in a heated debate over interest rate policies.
The uptick in stock prices comes as investors reassess the likelihood of a substantial 50 basis point rate cut by the Fed. Expectations for a major rate adjustment have surged after earlier dismissing such a possibility in light of recent inflation and employment data. Traders are now estimating a 49% chance of a half-point rate cut next week, a significant increase from the 15% probability reported on Thursday.
The shift in expectations followed reports from the Financial Times and The Wall Street Journal suggesting that the Fed’s decision on September 18 could be closely contested. Further stoking the debate, former New York Fed President Bill Dudley argued for the merits of a more substantial rate cut.
In response to these developments, the yield on the benchmark 10-year Treasury (^TNX) fell by 2 basis points to approximately 3.6% on Friday.
The stock market has been volatile recently, driven by fluctuating speculations about whether the Fed will implement a quarter-point or half-point rate cut in its upcoming decision. Concerns over a potential slowdown in the labor market and recession risks have contributed to this volatility, which Wall Street anticipates could continue if a 50 basis point cut is enacted.
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