NEW YORK — On Friday, U.S. stocks experienced a significant rebound, recovering more than half of their losses after a challenging week. As of 11:45 a.m. Eastern time, the S&P 500 surged by 1.8%, indicating it was poised for its best performance in six weeks. The Dow Jones Industrial Average saw a substantial increase of 761 points, also reflecting a 1.8% rise, while the Nasdaq composite matched this gain.
Eli Lilly emerged as a key player in boosting the market, particularly after competitor Novo Nordisk released information regarding a potential weight-loss treatment that analysts deemed underwhelming. This news positively impacted Eli Lilly, whose obesity treatment, Zepbound, lifted its stock by 5.1%.
The main catalyst for the upward movement in the market was the impressive performance of Nvidia, which rose alongside the general market sentiment following a report indicating that a favored inflation measure by the Federal Reserve was slightly lower than economists had predicted. This development served as a positive indicator amid concerns that inflation might remain persistently high, as reflected in previous reports showing inflation peaking above 9% and the Fed’s target set at 2%.
The apprehension surrounding inflation was a significant reason why Federal Reserve Chair Jerome Powell suggested earlier this week that there might be fewer interest rate cuts than previously anticipated next year. This caution sent ripples through the stock market, which had been buoyed by optimistic expectations for a series of rate cuts in the near future. Current assessments by traders suggest a likelihood of only one or two cuts, or potentially none at all, challenging previous assumptions.
Brian Jacobsen, chief economist at Annex Wealth Management, highlighted the fragile nature of market confidence, stating that a bit of fear can easily diminish enthusiasm during a rally, especially when multiples are expanding. The inflation data released on Friday led traders to adjust their predictions about the chances of no rate cuts in 2025, reducing it to around 15%.
Despite earlier optimism, stock prices showed signs of vulnerability after an impressive run, with critics noting that the market’s stellar gains required a series of favorable outcomes to remain justified. Wall Street’s worries were exacerbated by a recent political development: the House of Representatives rejected President-elect Donald Trump’s proposal aimed at preventing a government shutdown, raising concerns over political stability even with Republicans controlling both Congress and the presidency.
The stock market has seen some decline since Trump’s election victory, which initially sparked optimism for robust economic growth and reduced regulation for businesses. However, concerns about his trade policies and potential tariff implications have raised alarms about inflation, increasing national debt, and challenges for international trade.
Carl B. Weinberg from High Frequency Economics described the forthcoming year as rife with challenges for the global economy, citing political uncertainties in the U.S., anticipated trade conflicts, and geopolitical tensions. He expressed a lack of enthusiasm regarding these expected changes.
On the downside for Wall Street was U.S. Steel, whose stock dropped by 3.4% after the company indicated that its fourth-quarter performance would likely miss earlier projections. CEO David Burritt attributed this to continued low steel prices.
Meanwhile, Novo Nordisk experienced a significant stock decline, with its shares losing about 20.7% following the announcement regarding their obesity treatment, CagriSema. Nike’s shares slipped slightly by 0.1% despite exceeding quarterly profit expectations. Analysts believe that the company’s new CEO, Elliott Hill, is implementing strategies that may initially impact profits but are aimed at fostering sustained long-term growth through price reductions and innovations.
Despite these exceptions, the majority of stocks on the S&P 500 reported gains, with 98% rising. Notably, cruise lines enjoyed favorable results after Carnival Cruise Line surpassed earnings predictions, resulting in a 5.3% gain for Carnival. The cruise sector’s prospects appear robust, with CEO Josh Weinstein forecasting continued growth into 2025, aided by higher fares. Rival companies, including Norwegian Cruise Line and Royal Caribbean, also saw their stocks rise by at least 4.1%.
In the bond market, Treasury yields saw a decline, with the yield on the 10-year Treasury falling to 4.49% from 4.57% recorded late Thursday. On a global scale, stock indexes in Asia and Europe experienced modest declines.