U.S. stocks rebound on cooler inflation but end week in red

U.S. stocks rallied on Friday, buoyed by cooler-than-expected inflation data and dovish commentary from Federal Reserve officials, though major indexes still closed the week lower. The Personal Consumption Expenditure (PCE) index rose 2.4% annually in November, below the 2.5% forecast, easing inflation concerns. The Dow Jones Industrial Average rose 1.18%, the S&P 500 gained 1.09%, and the Nasdaq Composite climbed 1.03%, with real estate leading sector gains. Despite Friday’s rebound, all three major indexes posted weekly losses as markets reacted to the Federal Reserve’s announcement of just two projected rate cuts in 2025, down from four previously forecasted. The S&P 500 (SPY) recorded its steepest weekly decline in six weeks, falling 1.99%, while the Nasdaq (QQQ) and Dow (DIA) dropped 1.78% and 2.25%, respectively. Lower Treasury yields and a broad-based sector rally supported Friday’s performance, but traders remain wary of fiscal uncertainty and geopolitical risks.

Market Overview
• Dow rose 1.18%, S&P 500 gained 1.09%, Nasdaq climbed 1.03% on Friday.
• PCE inflation rose 2.4% annually in November, slightly below expectations.
• Major indexes fell for the week, with the S&P 500 down 1.99%.

Key Points
• Real estate led Friday’s gains, advancing 1.8% as Treasury yields declined.
• Markets anticipate the Fed’s first 2025 rate cut in March, followed by another in October.
• Congress races to avert a government shutdown before a midnight deadline.

Looking Ahead
• Investors eye fiscal policy and tariff decisions under Trump’s incoming administration.
• Triple witching boosted trading volumes, signaling heightened market activity.
• Small-cap stocks (RUT), driven by rate-cut optimism, could see further gains in 2025.

The rally underscores the sensitivity of markets to inflation data and Federal Reserve commentary, highlighting the ongoing balancing act between rate policy and economic resilience. Real estate stocks and small caps benefited from declining yields, but broader weekly losses reflect lingering concerns about fiscal and monetary uncertainty. As the year closes, traders will watch fiscal negotiations and inflation trends for clues about 2025 market dynamics. The ability of Congress to avoid a shutdown and the Fed’s cautious approach to rate adjustments will play key roles in shaping investor sentiment.

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