Market Rebound: Stocks Rise as Inflation Data Eases Fears
After a tumultuous week, US stocks bounced back on Friday morning as investors digested key inflation data that showed a deceleration in price increases during November. The tech-heavy Nasdaq Composite gained 0.6%, while the S&P 500 rose 0.7% and the Dow Jones Industrial Average put on 0.8%.
Inflation Data: A Mixed Bag
The latest reading of the Federal Reserve’s preferred inflation gauge, the core Personal Consumption Expenditures (PCE) index, showed price increases decelerated in November on a monthly basis and came in below economists’ estimates. However, prices still remained sticky, with the central bank fighting to bring inflation back down to its 2% target.
Fed’s Rate Cut: A Divided Decision
The Federal Reserve cut interest rates by 25 basis points at its last policy meeting of the year on Wednesday, but officials also signaled less easing to come in 2025, with inflation expected to remain elevated over the long term. The lone dissenter to the Federal Reserve’s rate cut, Beth Hammack, the president of the Cleveland Fed, said she voted against the move because “there is more work to do on inflation.”
Global Markets: Tariffs and Shutdown Fears
Global markets were pressured early in Friday’s session due to the threat of a government shutdown and President Trump’s tariff threats on Europe. Global chip stocks sold off, with Europe’s ASML and Taiwan’s TSMC falling 2% and 2.4%, respectively. Bitcoin prices retreated to around $97,000 per token amid record ETF outflows.
Stocks in Focus
Novo Nordisk plunged 20% after its obesity drug trial disappointed investors, while Tesla dropped 3% after recalling 700,000 US vehicles over a tire pressure monitoring system defect. FedEx rose 0.6% following an upgrade from Loop Capital, and Nike fell more than 1% after sharing fiscal second-quarter earnings that beat expectations but offered a disappointing outlook.
Economic Data
The core PCE index released on Friday showed decelerating, yet still sticky, price increases. The data comes after the central bank cut interest rates by 25 basis points at its last policy meeting of the year on Wednesday. Officials also signaled less easing to come in 2025, with inflation expected to remain elevated over the long term.
What’s Ahead
Investors will be closely monitoring a key inflation report set to shape future monetary policy. The Federal Reserve’s preferred inflation gauge, the core PCE index, is expected to have risen 0.2% month over month in November after prices rose 0.3% in October, according to Bloomberg data. Over the prior year, Wall Street expects core prices to rise 2.9%, ahead of the 2.8% gain seen in October.
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