Wall Street Heads for Best Week in a Month on Fed Hopes/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ U.S. stocks are closing in on their best week in five as investors anticipate the Federal Reserve’s first interest rate cut of 2025. The S&P 500 and Nasdaq hover near record highs, buoyed by easing inflation expectations and strong tech performance. But uncertainty looms over Trump’s tariff policies and political battles with the Fed.
Wall Street’s Record Rally: Quick Looks
- S&P 500 slipped 0.1% but remains near Thursday’s record.
- Dow Jones fell 117 points (0.3%), while the Nasdaq rose 0.2%.
- Investors expect the Fed to cut rates at next week’s meeting.
- Job market reports suggest a “soft landing” with slower growth but no recession.
- Inflation expectations steady at 4.8%, according to University of Michigan survey.
- RH and Adobe shares dipped after mixed earnings reports.
- Super Micro Computer and Microsoft gained on AI shipments and EU antitrust settlement.
- Japan’s Nikkei 225 and Hong Kong’s Hang Seng both posted strong gains.
- 10-year Treasury yield rose to 4.06%, reversing earlier declines.
- Trump escalates feud with Fed, pushing to oust Governor Lisa Cook before Wednesday’s decision.
Wall Street Heads for Best Week in a Month on Fed Hopes
Deep Look
Wall Street is wrapping up its strongest week in the last five, with major indexes hovering near record highs as investors bet that the Federal Reserve will cut interest rates for the first time this year.
Markets Hover Near Records
By mid-morning Friday, the S&P 500 slipped 0.1%, the Dow Jones Industrial Average dropped 117 points (0.3%), and the Nasdaq gained 0.2%. All three indexes hit record levels the day before, fueled by growing confidence that rate cuts are imminent.
The optimism stems from a belief that the Fed sees a “Goldilocks” job market—slowing enough to justify easing but not collapsing into recession territory. Inflation, meanwhile, remains in check, lowering fears that monetary stimulus would reignite price surges.
“This market is moving on conviction that inflation is not about to spiral,” said Scott Wren, senior strategist at Wells Fargo Investment Institute.
Inflation Expectations Easing
A University of Michigan survey reinforced the bullish tone, showing U.S. consumers expect 4.8% inflation over the next year, unchanged from last month. Stable expectations give the Fed more room to cut rates without stoking fears of runaway prices.
Mortgage rates have already dipped in anticipation of a cut, boosting hopes for stronger housing demand.
Corporate Highlights
Earnings reports delivered mixed signals:
- RH (Restoration Hardware) fell 1% after reporting weak revenue and trimming its forecast, with CEO Gary Friedman citing “the polarizing impact of tariff uncertainty and the worst housing market in almost 50 years.”
- Adobe slipped 1% despite beating profit estimates and raising its forecast. CEO Shantanu Narayen credited AI tools for growth but investors took profits after recent gains.
- Super Micro Computer jumped 2.9% after announcing shipments of AI-ready racks with Nvidia’s Blackwell Ultra chips, riding the wave of AI demand.
- Microsoft rose 1.2% after the European Commission approved its plan to unbundle Teams from Office, ending a long antitrust probe.
Global Markets and Bonds
Abroad, stocks also advanced. Japan’s Nikkei 225 climbed 0.9% to another all-time high, while Hong Kong’s Hang Seng rose 1.2%. European markets likewise saw broad gains.
In bonds, the 10-year Treasury yield edged up to 4.06% from 4.01% Thursday, clawing back part of the week’s decline. Yields have trended downward overall as Fed cut expectations grow.
Politics, Tariffs, and the Fed
Despite market enthusiasm, uncertainty looms. The Fed has resisted cuts throughout 2025, wary that President Donald Trump’s tariffs could push consumer prices higher. Lower rates in that environment risk worsening inflation.
Trump has repeatedly clashed with the Fed, particularly Chair Jerome Powell, whom he mocks as “Too Late.” The president has also targeted Fed Governor Lisa Cook, accusing her of misconduct and seeking her removal.
On Thursday, the Trump administration asked an appeals court to remove Cook from the Fed board before Wednesday’s meeting, despite a federal judge reinstating her days earlier. The high-profile standoff adds political drama to an already pivotal week for monetary policy.
What’s Next
Investors now await the Fed’s decision, expected Wednesday. Markets are pricing in three rate cuts for 2025. If the Fed delivers fewer, disappointment could spark a pullback even if the broader economy avoids recession.
For now, Wall Street remains buoyant, reflecting a belief that policymakers will deliver the easing investors have long anticipated.
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