U.S. stocks climbed on Wednesday, fueled by growing optimism that the Federal Reserve may soon begin cutting interest rates, alongside the typically slower trading volumes associated with the Thanksgiving week.
The Dow Jones Industrial Average rose 30 points, while the S&P 500 gained 0.3% and the Nasdaq Composite advanced 0.5%. Investors are parsing recent economic data and comments from Fed officials for clues about the timing and pace of potential rate reductions. Market participants are currently pricing in a roughly 70% chance of a rate cut by the Fed’s March meeting, according to the CME FedWatch tool.This week’s weaker-than-expected manufacturing data and a drop in consumer confidence have bolstered expectations for a more dovish stance from the central bank.Trading volume was light, a common characteristic during the week of Thanksgiving, perhaps amplifying market movements.
The focus on potential Fed policy shifts comes as investors assess the overall health of the U.S. economy. While inflation remains above the Fed’s 2% target, recent data suggests it is indeed cooling, prompting speculation that the central bank might potentially be nearing the end of its tightening cycle. The next key economic indicator will be the Personal Consumption Expenditures (PCE) price index, due out later this month, wich is the Fed’s preferred measure of inflation. A softer-than-expected PCE reading could further strengthen the case for rate cuts.
