US stocks edged higher on Friday, setting the stage for strong weekly wins after Wall Street’s expectations for a jumbo interest rate cut by the Federal Reserve shot up overnight.
The S&P 500 (^GSPC) moved up about 0.2%, while the tech-heavy Nasdaq Composite (^IXIC) climbed just over the flat line to point to a fifth day of gains for both gauges amid a comeback for tech stocks. The Dow Jones Industrial Average (^DJI) also added roughly 0.2%.
Stocks are rising as the market warms once again to the likelihood of a half-point rate cut by the Fed after virtually writing off the chances of a big pivot in light of recent inflation and jobs data. Traders are now pricing in a 49% chance of a 50 basis point move next week, compared with 15% at one point on Thursday.
The odds of a 0.5% reduction jumped amid reports by the Financial Times and The Wall Street Journal that the size of the Fed’s Sept. 18 decision will be a close call. Adding to the debate, influential former New York Fed president Bill Dudley said there’s a “strong case” for a deeper cut.
The yield on the benchmark 10-year Treasury (^TNX) slipped early Friday, down 2 basis points at around 3.66%. At the same time, the yield on 2-year notes, seen as sensitive to monetary policy, dropped to just above 3.58%.
Markets have been whipsawed in recent days by shifting speculation over whether the Fed will opt for a cut of a quarter point or a half point when it makes its expected first rate cut this cycle. Concerns about a labor market slowdown and the risk of a recession have helped feed that volatility — which Wall Street believes could persist if a 0.5% cut comes in.
In individual stocks, Adobe (ADBE) shares sank in morning trading after the software maker’s outlook failed to show an uplift from its AI push. Meanwhile, Oracle (ORCL) stock rose again thanks to an upbeat forecast for a surge in revenue in the next five years, fueled by cloud demand.
Boeing (BA) shares pulled back as factory workers walked out on strike, halting manufacturing across the planemaker’s Seattle hub, its largest.
