Sept 13 (Askume) – Wall Street’s main stock indexes closed with gains on Friday as investors remained confident about the prospect of a sharp interest rate cut by the Federal Reserve next week, while interest rate-sensitive small-cap stocks outperformed the broader market.
Bets on the size of the Fed’s interest rate cut have been volatile, with bets broadly unchanged on Friday night. According to the CME’s FedWatch tool ,Expectations for a 50 basis point rate cut rose to 49% from 28% on Thursday , with the tool showing a 51% chance of a 25 basis point reduction.
Former New York Federal Reserve Chairman Bill Dudley said late Thursday that there is a strong case for a 50 basis point rate cut .
The Federal Reserve will face a tough decision on how much to cut interest rates on September 18, the Wall Street Journal and other media reported on Thursday.
“There are rumors again that the Fed has abandoned the 50 basis point range that was being discussed,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Southfield, Miss.
In contrast, news of a modest rise in producer prices and consumer price data released on Wednesday fuelled speculation that the Federal Reserve would opt to cut interest rates by a modest 25 basis points on Thursday.
While fresh expectations of a sharp rate cut boosted large-cap indexes on Friday, the optimism was most evident in the Russell 2000 small-cap index (.RUT), which rose 2.5% on the day and 4.4% for the week.
Smaller companies are more sensitive to changes in interest rates because they rely more on borrowed funds and floating-rate loans.
Baird believes the stock market reflects the optimism of investors who believe a 50 basis point rate cut would not signal an imminent recession.
“If investors look at this and say they have to move faster because they’re behind the curve, you’re not going to see a move higher in risk assets like the small-cap markets. The higher sectors are moving pretty strongly today,” Baird said.
Jason Pride, director of investment strategy and research at Philadelphia-based Glenmede, said Friday’s gains were likely driven by Dudley’s call for a 50 basis point rate cut.
A survey on Friday also showed US consumer confidence improved in September as inflation slowed , though Americans remained cautious ahead of the November presidential election.
The Dow Jones Industrial Average (.DJI) rose 297.01 points, or 0.72%, to 41,393.78 points; the S&P 500 Index (.SPX) rose 30.26 points, or 0.54%, to 5,626.02 points; the IX rose 114.30 points, or 0.65%, to 5,626.02 points;
All three major US benchmark indices closed at their highest levels in nearly two weeks and posted strong weekly gains.
The S&P 500 rose 4.02% this week, and the Nasdaq rose 5.95%, both recording their largest weekly percentage gain since early November. The Dow gained 2.60% this week.
Photoshop Creator AdAdobe (ADBE.O)The company closed down 8.5% after it reported lower-than-expected fourth-quarter profit.
Boeing (BA.N) shares fell 3.7% on Friday after worker deaths at its US West Coast plantsA strike was organised and the contract agreement was rejected by an overwhelming majority.
Chinese e-commerce company Pinduoduo(PDD.O) shares fell 2.4% after the Biden administration said it would limit duty-free entry into the United States for low-value goods under a “minimum” threshold of $800.
Uber (UBER.N) shares rose 6.4% after the ride-hailing platform said it would expand its operations in Austin, Texas, and Atlanta.Alphabet (GOOGL.O) will partner with Waymo to provide self-driving rides .
Advancing issues outnumbered declining ones on the New York Stock Exchange by a ratio of 5.54 to 1, with 653 stocks hitting new highs and 27 hitting new lows.
A total of 3,275 stocks rose and 1,026 fell on the Nasdaq. The ratio of rising stocks to declining stocks was 3.19:1. 60 S&P 500 stocks hit new 52-week highs and one new low; 116 Nasdaq Composite stocks hit new highs and 54 new lows.
Volume on U.S. exchanges was 10.15 billion shares, compared with the average of 10.78 billion shares over the last 20 trading days.
