U.S. stocks rose on Friday as investors continued to anticipate whether the Federal Reserve might take a more aggressive approach in cutting interest rates at its upcoming policy meeting. Gold also reached new record highs, buoyed by expectations of a steeper rate cut.
Market sentiment shifted following reports suggesting that the Fed could be considering a half-percentage-point cut instead of the expected quarter-point. This speculation drove futures tied to the Fed’s policy rate to reflect a 47% chance of a 50-basis-point cut, up from 28% earlier in the week.
The prospect of deeper rate cuts spurred gains in stocks, gold, and Treasury bonds while putting downward pressure on the U.S. dollar. All three major U.S. stock indexes finished the day in positive territory. The Dow Jones Industrial Average rose 0.72%, the S&P 500 climbed 0.54%, and the Nasdaq Composite advanced by 0.65%. Globally, MSCI’s index of stocks increased by 0.61%.
Former New York Fed President Bill Dudley further fueled hopes for a larger rate cut, stating, “There’s a strong case for 50” at a forum in Singapore. However, some economists cautioned that the Fed may opt for a more cautious approach given lukewarm inflation data. Douglas Porter, chief economist at BMO Capital Markets, noted that while some rate-cutting cycles have begun with more significant reductions, current financial conditions show little stress.
In Asia, stocks were more subdued. China’s Shanghai Composite dropped 0.48%, while Japan’s Nikkei closed 0.68% lower, though it remained up for the week.
