According to the CME FedWatch tool, traders now see a roughly 70% chance that the Fed will cut its key lending rate by 25 basis points in December, up from about a 37% chance the previous day.
“The biggest tailwind today is the change in the odds of a rate cut for the December Fed meeting,” said Ross Mayfield, investment strategist at Baird in Louisville, Kentucky.
According to preliminary data, the S&P 500 gained 64.89 points, or 0.99%, to close at 6,603.65, while the Nasdaq Composite gained 192.83 points, or 0.87%, to close at 22,273.08. The Dow Jones Industrial Average rose 505.03 points, or 1.08%, to 46,257.29.
Stocks have been volatile over the past two sessions, reflecting sky-high valuations in the technology sector and growing investor anxiety over what could happen at the December Fed meeting.
Boston Fed President Susan Collins said on CNBC that policy was “in the right place,” casting doubt about the need for another rate cut. Her stance contrasted with dovish signals from some peers, which could add to market volatility ahead of the December meeting. Global brokerages remained divided on the likelihood of a December rate cut after the release of the long-delayed September jobs report on Thursday, which marks the last employment reading before the Fed’s ruling next month.
Shares of Eli Lilly rose after the company became the first drugmaker to touch a $1 trillion market capitalization.
Alphabet shares closed sharply higher on Friday as well.
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