The U.S. stock market had a strong end of the week amid expectations that the Federal Reserve will opt for a deeper interest rate cut due to favorable inflation data.
Tech-heavy Nasdaq Composite rose by 0.65% or 114.30 points to close at 17,683.98. This was the fifth consecutive winning day for the index and brought its weekly gains to 5.04%, marking its best week of 2024.
Benchmark S&P 500 closed at 5,626.02 after a 0.54% or 30.26 points gain, while blue-chip Dow Jones Industrial Average soared by 0.72% or 297.01 points for a 41,393.78 close. S&P 500 is up 3.38% for the week, while Dow Jones recorded a gain of 2.07%.
The US stock rally has been largely attributed to the expectations that the Fed will make a 50 basis points rate cut instead of the previously estimated 25 basis points. According to CME’s FedWatch, 45% of the traders are betting on a 50 basis points cut, while 55% are pricing a 25 basis points cut.
“I think there’s a strong case for 50,” William Dudley, former New York Fed President, said on Friday. “I know what I’d be pushing for.”
The Fed is expected to announce the changes to its policy at the upcoming meeting on September 18.