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Stocks advanced on Friday as a softer-than-expected inflation reading and dovish comments from Federal Reserve officials eased concerns over interest rates.

The three major Wall Street indices rebounded after two consecutive sessions of losses. The Dow Jones Industrial Average, comprising 30 blue-chip stocks, rose 1.18% to 42,840.26 points. The SPX 500 gained 1.09% to 5,930.85 points, while the tech-heavy Nasdaq Composite climbed 1.03% to 19,572.60 points.

SPX

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The Personal Consumption Expenditures (PCE) price index increased by 0.1% in November, below the 0.2% expected by analysts. The core PCE index, which excludes volatile food and energy prices, also rose 0.1%, compared to the anticipated 0.2%. On an annual basis, the PCE inflation rate stood at 2.4%, slightly lower than the 2.5% forecast.

Following the data release, traders raised their bets on rate cuts for 2025, now anticipating the first cut in March and a second in October. Prior to the data, there was only a 50% probability of a second cut occurring by December 2025, according to the CME FedWatch Tool.

Federal Reserve Policy

Earlier this week, the Federal Reserve implemented its third rate cut of the year but reduced its forecast for 2025 to just two quarter-point cuts, down from the four predicted in September. The adjustment reflects expectations of a resilient economy and persistent inflationary pressures.

The Fed’s announcement on Wednesday triggered a sell-off, which extended into Thursday. Despite Friday’s rally, all three major indices posted weekly losses. The Dow Jones fell 2.25%, the S&P 500 declined 1.99%, and the Nasdaq dropped 1.78%.

Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.