The US Stock Market is Boosted by Solidifying Interest Rate Cuts

U.S. stocks maintained their upward trajectory, aiming for an eight-week bullish streak, as inflation indicators strengthened Wall Street's belief in potential early and substantial interest rate cuts in the coming year. Treasury yields exhibited a mixed pattern in anticipation of an early market closure.

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The S&P 500 experienced a 0.4% increase following the release of the latest data, which broadly aligned with market expectations. The benchmark is on course to achieve an eight-week winning streak, marking the longest such run in over five years. Similarly, the Nasdaq 100 is poised for a comparable run of success.

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Nike Inc. emerged as the weakest performer, witnessing a New York trading decline of up to 12%. The sports apparel giant cited a dimmer sales outlook and unveiled a cost-cutting plan of up to $2 billion.

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In the derivatives market, traders are expressing confidence in interest rates being lowered by over 150 basis points in the upcoming year, doubling the Federal Reserve's forecast. This sentiment gained further support from data indicating a decline in the U.S. core personal consumption expenditures price index, the Fed's preferred measure of core inflation, which fell to 3.2% last month. Economists surveyed by Bloomberg had anticipated a slip to 3.3% in November.

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Treasuries displayed a mixed performance, with the yield on the U.S. 10-year bond hovering around 3.89%. Ben Jeffery of BMO Capital Markets noted that the market had anticipated a downside surprise, leading to a somewhat counterintuitive price response. He anticipated a subdued market activity due to the approaching early closure and an extended weekend.

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Additional data on Friday revealed that consumers in the world's largest economy were increasingly confident that inflation was moving in the right direction. Concurrently, a report on new-home sales in the U.S. unexpectedly declined, potentially indicating a temporary setback for the anticipated housing market recovery.

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The U.S. dollar traded at five-month lows against its Group-of-10 counterparts, reflecting expectations of imminent rate hikes.

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Oil prices extended their most significant weekly gain in two months as shippers opted for lengthy detours to avoid militant attacks in the Red Sea. This geopolitical development contributed to the upward momentum in oil prices.