Wall Street approached the end of its strongest week in five as U.S. stocks remained near record highs on Friday. The S&P 500 edged up by 0.1% from its previous all-time high, while the Dow Jones Industrial Average fell by 188 points, or 0.4%, and the Nasdaq composite increased by 0.5%. Both the Dow and Nasdaq had also set records the day before.
The recent rally has been driven by expectations that the Federal Reserve will cut its main interest rate for the first time this year at its meeting next week. Anticipation of a rate cut has already led to lower mortgage rates, which could stimulate economic activity.
These expectations have grown following reports indicating that the U.S. job market may be reaching a balance point—slowing enough to encourage Fed intervention but not so much as to signal an impending recession, with inflation remaining contained.
Much depends on whether these assumptions prove accurate. Stocks have risen based on hopes for multiple rate cuts this year, but if the Fed delivers fewer than expected, markets could decline even if other conditions remain stable and tariffs do not push inflation higher.
Scott Wren, senior global market strategist at Wells Fargo Investment Institute, said: “Investors, ‘and I think the Fed, are convinced that we are not on the verge of a surge in inflation.’”
A University of Michigan survey released Friday indicated that consumer expectations for inflation over the coming year held steady at 4.8%, unchanged from last month’s reading. Longer-term inflation expectations rose slightly but remained below levels seen in April when President Donald Trump announced new worldwide tariffs.
Meanwhile, major indexes continued to hover around their peak values.
Among individual companies, RH shares dropped 4.7% after reporting quarterly profit and revenue below analyst forecasts and lowering its full-year revenue outlook due to what CEO Gary Friedman described as “the polarizing impact of tariff uncertainty and the worst housing market in almost 50 years.”
Oracle’s stock declined by 4.1%, weighing down the S&P 500 index; however, this followed a strong performance earlier in the week when it posted its best trading day since 1992 after announcing multibillion-dollar contracts related to artificial intelligence technology.
Super Micro Computer saw shares rise by 2.9% after it began large-scale shipments of racks equipped with Nvidia’s Blackwell Ultra hardware for AI applications.
Microsoft gained 2% following news that European Union regulators accepted changes proposed to its Teams platform amid an antitrust investigation. The European Commission stated Friday that Microsoft’s final commitments—including further adjustments after market testing—would address competition concerns regarding Teams’ bundling with Office software.
Internationally, European stock indexes slipped while most Asian markets advanced; Japan’s Nikkei 225 hit another record with a gain of 0.9%, and Hong Kong’s Hang Seng Index rose by 1.2%.
In bond markets, yields on U.S. government debt rebounded slightly from earlier declines; specifically, yields on ten-year Treasury notes climbed from Thursday’s close of 4.01% to reach 4.07%. Yields had generally fallen as traders bet on imminent Fed rate cuts.
The Federal Reserve has maintained current rates through most of this year amid concerns that tariffs introduced under President Trump could increase consumer prices broadly across American households—a risk heightened if interest rates were lowered prematurely.
President Trump has expressed frustration over Fed policy decisions and threatened action against central bank officials including Chair Jerome Powell and Governor Lisa Cook—whom he accused of mortgage fraud—and sought their removal ahead of next week’s monetary policy announcement.
On Thursday, his administration asked an appeals court to remove Cook from her position before Wednesday’s scheduled decision on interest rates; although Trump attempted her dismissal in August, a federal judge ruled against it earlier this week and reinstated her.
