A softer PCE reading strengthens expectations of a Fed rate cut next week, lifting Wall Street into year-end rally mode
MARKET INSIDER – The S&P 500 climbed for a fourth straight session Friday, powered by fresh evidence that U.S. inflation is continuing to cool ahead of next week’s pivotal Federal Reserve decision. The index gained 0.5% — placing it just half a percent below its all-time high — while the Nasdaq Composite and Dow Jones Industrial Average each rose 0.5%, reflecting broad-based optimism across markets.
Investors digested a wave of economic data that reinforced the case for a December rate cut. The Commerce Department’s long-delayed September core PCE reading — the Fed’s preferred inflation gauge — clocked in at 2.8%, slightly below expectations. That marginal but meaningful miss was enough to cement market conviction: traders now assign an 87% probability that the Fed will cut rates by 25 basis points on Wednesday, the final meeting of the year.
With inflation cooling and the labor market showing signs of fatigue, investors are betting the Fed has the cover it needs to pivot from its restrictive stance. At the same time, consumer sentiment surprised to the upside, with the University of Michigan survey registering stronger-than-expected confidence for December.
Markets also reacted to corporate news, including Netflix’s $72 billion blockbuster bid for Warner Bros. Discovery’s film and streaming assets. Netflix’s stock recovered from early losses after U.S. officials signaled skepticism toward the deal, while WBD shares rose 3%.
The broader rally continues a strong December for equities. The Nasdaq is coming off eight gains in nine sessions, fueled by tech standouts like Meta and Nvidia. For the week, the S&P 500 is up 0.4%, the Nasdaq nearly 1%, and the Dow 0.7% — modest but steady advances that hint at a potential year-end melt-up if the Fed confirms the market’s rate-cut narrative.
With the S&P 500 sitting within striking distance of a record and expectations aligned for monetary easing, investors enter next week with a rare combination of relief, momentum, and anticipation — a setup that could define the final stretch of 2025’s market story.
