Major Rally on Wall Street as Rate Cut Expectations Soar
US stock markets experienced a significant upswing on Friday, with major indices posting substantial gains as traders dramatically increased their bets on an interest rate cut by the Federal Reserve next month. The optimistic sentiment was further boosted by positive developments surrounding Nvidia's artificial intelligence chip sales to China.
Fed Policy Shift Drives Market Optimism
The primary catalyst for Friday's rally was a sharp increase in expectations for monetary policy easing. According to the CME FedWatch Tool, traders now see a more than 70% chance that the Fed will cut its main lending rate by 25 basis points in December. This represents a dramatic increase from the near 37% probability observed earlier in the day.
The shift in sentiment followed comments from New York Fed President John Williams, who stated that the central bank could still cut rates "in the near term" without jeopardizing its inflation objectives. Williams, being a voting member of the Federal Open Market Committee, carries significant influence in monetary policy decisions.
Ross Mayfield, investment strategist at Baird in Louisville, Kentucky, emphasized that "the big tailwind today is that shift in rate cut odds for the December Fed meeting."
Nvidia Boosted by Potential China Sales Approval
Adding to the positive momentum, Nvidia shares advanced 1.4% following a Reuters report indicating that the Trump administration is considering greenlighting sales of the company's H200 AI chips to China. This development could potentially open significant revenue opportunities for the chipmaker in one of the world's largest markets.
The technology sector received additional support from Alphabet, which saw its shares surge more than 4% during the trading session.
Record Performances and Market Statistics
In a historic milestone for the pharmaceutical industry, Eli Lilly became the first drugmaker to achieve a $1 trillion market capitalization. The company's shares reached record levels, closing 2% higher on the day.
The market breadth strongly favored advancing issues, with NYSE data showing advancers outnumbering decliners by a 3.83-to-1 ratio. On the Nasdaq, the ratio stood at 3.13-to-1 in favor of advancing stocks.
Here are the key index performances for the day:
- Dow Jones Industrial Average: Rose 798.49 points (1.74%) to 46,550.75
- S&P 500: Gained 117.44 points (1.80%) to 6,656.20
- Nasdaq Composite: Advanced 426.50 points (1.93%) to 22,504.55
Divergent Views Among Fed Officials
Despite the overall optimistic tone, some cautionary notes emerged from other Federal Reserve officials. Boston Fed President Susan Collins expressed that policy was "in the right place," indicating skepticism about the necessity of another rate cut. This divergence in views among Fed officials highlights the ongoing debate within the central bank and could contribute to market volatility ahead of the crucial December meeting.
The markets have experienced heightened volatility in recent sessions, reflecting investor concerns about elevated valuations in the technology sector and uncertainty surrounding the Fed's upcoming policy decision. Global brokerages remain divided on the likelihood of a December rate cut, particularly after Thursday's release of the long-delayed September jobs report, which represents the final employment data before the Fed's next policy announcement.
