Markets React to Cooling Inflation Data
US stocks closed higher on Friday. Wall Street reacted positively to new inflation data. The S&P 500 (^GSPC) rose by 0.19%. The Nasdaq Composite (^IXIC) gained about 0.3%. Both indices saw their fourth consecutive day of gains. The Dow Jones Industrial Average (^DJI) also saw a 0.2% increase. Investors are focused on the upcoming Federal Reserve meeting. They are heavily betting on a Fed interest rate cut.
Strong Odds for a Fed Interest Rate Cut
Traders are now pricing in high odds for a rate move. The central bank is expected to cut rates next Wednesday. According to CME FedWatch, the probability is now 87%. This is a significant jump from 62% just one month ago. Cooling inflation data supports these strong expectations.
PCE Index and Consumer Confidence
The delayed PCE price index reading was released Friday. The data showed inflation rose close to expectations in September. Crucially, the “core” PCE index cooled slightly. This index is the Fed’s preferred inflation gauge. It rose 2.8% on an annual basis. Furthermore, US consumer confidence also improved. It rose for the first time in five months. Improved inflation expectations drove this increase.
Labor Market Shows Mixed Signals
The jobs market presented a mixed picture this week. A Challenger report showed job cuts last month. US companies cut 71,000 jobs in November. This was the highest November print since 2022. However, weekly jobless claims fell to a multi-year low. They dropped to their lowest level since September 2022. This suggests the labor market is cooling gradually. It is not declining rapidly. This gradual cooling reinforces the case for a Fed interest rate cut.
Corporate News and Earnings
Corporate activity also made headlines. Netflix (NFLX) is set to buy a major studio. They will acquire Warner Bros. Discovery’s (WBD) studios. The deal is valued at $72 billion. WBD shares climbed 2% on the news. Netflix stock, however, ticked down slightly. In earnings, Hewlett Packard Enterprise (HPE) rose. Their quarterly sales outlook missed high AI-fueled expectations. However, the stock still gained. All eyes remain on the upcoming decision regarding the Fed interest rate cut.
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