By STAN CHOE AP Business Writer
NEW YORK (AP) — U.S. stocks rose Friday to turn what would have been one of the market’s worst weeks of the year into just a pretty bad one.
The S&P 500 rallied 1.1% for its best day in six weeks and shaved its loss for the week down to 2%. The Dow Jones Industrial Average jumped 498 points, or 1.2%, and the Nasdaq composite gained 1%.
Superstar stock Nvidia and other Big Tech companies led the market, which got a lift after a report said a measure of inflation the Federal Reserve likes to use was slightly lower last month than economists expected. It’s an encouraging signal following recent reports suggesting inflation may be tough to get all the way down to the Fed’s 2% goal from its peak above 9%.
The threat of higher inflation was one of the reasons Fed Chair Jerome Powell gave this week when the central bank hinted it may deliver fewer cuts to interest rates next year than it earlier expected.
That warning sent a shock through the stock market, which had run to 57 all-time highs this year amid the widespread assumption the Fed would deliver a string of cuts to rates into 2025. Now traders are largely betting on one, two or perhaps even zero next year, according to data from CME Group.
“When optimism is rising and market multiples are expanding, it just takes a little fear to take the veneer off a market rally,” according to Brian Jacobsen, chief economist at Annex Wealth Management.
Friday’s better-than-expected inflation data pushed traders to trim their bets for zero cuts in 2025, which they now collectively see a 16% chance of. Easier interest rates would boost the economy by making it cheaper for households and businesses to borrow, but they could also provide fuel for inflation.
Critics had been warning stock prices were vulnerable to drops after running so high and that the market likely needed everything to go correctly to justify its stellar gains for the year. Besides the diminished hopes for several rate cuts next year, Wall Street got another reminder late Thursday that everything may not go as expected.
The House of Representatives resoundingly rejected President-elect Donald Trump’s plan to keep the U.S. government fully running ahead of a potential shutdown. The bickering that ensued indicates Washington may not run smoothly even with Republicans in full control of the House, Senate and White House.
The U.S. stock market has lost a chunk of its gain since Trump’s win on Election Day, which raised hopes for faster economic growth and more lax regulations that would boost corporate profits. Worries have risen that Trump’s preference for tariffs and other policies could lead to higher inflation, a bigger U.S. government debt and difficulties for global trade.
“Next year will be a time of huge challenges to the world economy,” High Frequency Economics’ Carl B. Weinberg wrote in a note to clients, citing U.S. political uncertainty, expected global trade wars and geopolitical uncertainty. “We do not look forward to these changes.”
On the losing end of Wall Street was U.S. Steel, which sank 5% after saying its fourth-quarter results will likely come in below its earlier forecast. CEO David Burritt said steel prices remain depressed.
Danish company Novo Nordisk saw its stock that trades in the United States tumble 17.8% after giving an update on a potential weight-loss treatment that analysts said fell short of expectations.
Nike’s stock slipped 0.2% despite reporting a better profit for the latest quarter than analysts expected.
Analysts said changes by Nike’s new CEO, Elliott Hill, to turn around the company will likely cut into financial results in the near term to drive better long-term growth. The company is likely to cut prices to clear its warehouses of old products, for example, and open space for a new wave of innovation.
Those were the exceptions, though. Roughly nine of every 10 stocks in the S&P 500 rose.
Cruise lines climbed after Carnival steamed past analysts’ expectations for profit in the latest quarter.
CEO Josh Weinstein said it’s seeing strong demand and expects growth to continue into 2025 thanks in part to higher prices. Carnival climbed 6.4%, and rival Norwegian Cruise Line rose 5.9%.
Eli Lilly rose 1.3% following Novo Nordisk’s update on its potential treatment for adults with obesity. A stumble for its rival could benefit Eli Lilly, whose Zepbound helps treat obesity.
All told, the S&P 500 rose 63.77 points to 5,930.85. The Dow Jones Industrial Average gained 498.02 to 42,840.26, and the Nasdaq composite climbed 199.83 to 19,572.60.
In the bond market, Treasury yields eased. The yield on the 10-year Treasury fell to 4.52% from 4.57% late Thursday.
In stock markets abroad, indexes fell modestly across much of Asia and Europe.
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AP Writers Matt Ott and Zimo Zhong contributed