US Stocks Rebound on Friday as Investors Anticipate Rate Cuts and Looser Regulations
Markets Rebound
US stocks rebounded on Friday as investors near the end of a holiday-shortened week that brought with it expectations of additional Federal Reserve rate cuts and looser regulatory policies from the incoming administration. A broad rally sent all three major US stock indexes to a higher close, with megacap growth companies, such as Tesla and Nvidia, providing much of the muscle to the upside and putting the tech-heavy Nasdaq out front.
Economic Outlook
On the economic front, the Institute for Supply Management’s (ISM) purchasing managers’ index (PMI) surprised to the upside by gaining 0.9 point to 49.3, its highest reading since March, nudging ever closer to expansion territory. A run of fairly robust economic data has called into question the need for additional interest rate cuts from the Fed in the near term due to the possibility of re-igniting inflationary pressures.
Market Commentary
"After the late-in-the-year weakness, and a very oversold market, we finally saw some buyers step in," said Ryan Detrick, chief market strategist at Carson Group in Omaha. "Obviously the past week-and-a-half has been disappointing for the bulls, but volume has been light and there hasn’t been a lot of news." "Let’s just remember, starting next week, on Monday, that’s when a lot of the big money managers come back to the desk," Detrick added. "We’ll see if this bullish trend can continue."
Sector Performance
All 11 major sectors in the S&P 500 closed higher, with consumer discretionary stocks enjoying the largest percentage gain after Thursday’s rout. With fourth-quarter earnings season still several weeks away, analysts see S&P 500 earnings growth, in aggregate, of 9.6 per cent year-on-year, according to LSEG data.
Company Performance
Microsoft shares gained 1.1 per cent after the company said it would invest $80 billion on AI-enabled data centers in fiscal 2025. US Steel shares dropped 6.5 per cent after President Joe Biden blocked the proposed sale of US Steel to Japan’s Nippon Steel for $14.9 billion, citing national security concerns. Molson Coors and Brown Forman slid by 3.4 per cent and 2.5 per cent, respectively, after US Surgeon General Vivek Murthy said that alcoholic drinks should carry a label warning of cancer risks.
Conclusion
The S&P 500 posted 2 new 52-week highs and 14 new lows while the Nasdaq Composite recorded 64 new highs and 30 new lows. Volume on US exchanges was 14.09 billion shares, compared with the 14.91 billion average for the full session over the last 20 trading days.
FAQs
Q: What was the performance of the S&P 500 and the Nasdaq Composite?
A: The S&P 500 gained 73.92 points, or 1.26 per cent, to 5,942.47, while the Nasdaq Composite gained 340.88 points, or 1.77 per cent, to 19,621.68.
Q: What was the performance of the Dow Jones Industrial Average?
A: The Dow Jones Industrial Average rose 339.86 points, or 0.80 per cent, to 42,732.13.
Q: What was the performance of individual companies?
A: Microsoft shares gained 1.1 per cent, while US Steel shares dropped 6.5 per cent. Molson Coors and Brown Forman slid by 3.4 per cent and 2.5 per cent, respectively.
Q: What is the outlook for the US economy?
A: Richmond Fed President Thomas Barkin said the US 2025 economic outlook was positive, despite uncertainty about the impact of trade and other policies that may be pursued by the incoming Trump administration.
