NEW YORK – U.S. stocks closed nearly unchanged on Friday, as investors paused buying after a strong rally in the prior session that was fueled by an upsized interest-rate cut by the Federal Reserve, while Nike’s (NYSE: NKE) gains helped nudge the Dow to a record.
After notching their biggest daily percentage gains since mid-August, major averages were subdued for most of the session but managed to secure weekly gains of at least 1%.
Stocks briefly had pared losses after comments from Fed Governor Christopher Waller increased expectations the central bank will cut interest rates by 50 basis points at its November meeting, having just cut by 50 bps on Wednesday.
However, fellow Governor Michelle Bowman maintained that a smaller Fed cut this week would have been preferred.
“The market is still trying to recalibrate because, yes, there were some market participants that may have expected 50 basis points but a lot of people didn’t,” said Sid Vaidya, U.S. chief wealth strategist at TD Wealth in New York.
“You have to be a little bit more selective and measured just because we are expecting growth to slow down a little bit and valuations, especially in large-cap growth, are a bit stretched so you want to be a bit selective.”
The Dow Jones Industrial Average rose 38.17 points, or 0.09%, to 42,063.36, the S&P 500 lost 11.09 points, or 0.19%, to 5,702.55 and the Nasdaq Composite lost 65.66 points, or 0.36%, to 17,948.32.
For the week, the S&P 500 gained 1.36%, the Nasdaq rose 1.49%, and the Dow climbed 1.62%.
Markets are fully pricing in a cut of at least 25 bps in November, with expectations for a cut of 50 bps given a 48.9% chance, according to CME’s FedWatch Tool.
Utilities surged 2.69% to a record high as the best-performing of the 11 major S&P sectors, led by a 22.29% jump in Constellation Energy (NASDAQ: CEG) shares after the company signed a data center deal with Microsoft (NASDAQ: MSFT) to help resurrect a unit of the Three Mile Island nuclear plant in Pennsylvania.
Also supporting the Dow was Intel (NASDAQ: INTC), whose shares closed up 3.31% after the Wall Street Journal reported Qualcomm (NASDAQ: QCOM) had made a takeover approach to the chipmaker.
The Fed began its monetary-easing cycle on Wednesday and projected a period of steady economic growth and low unemployment and inflation.
FedEx (NYSE: FDX) plunged 15.23% after lowering its full-year revenue forecast, sending the Dow Jones Transport index down 3.53%, its biggest daily drop since late April 2023.
Nike (NYSE: NKE) jumped 6.84% after saying former senior executive Elliott Hill will rejoin the company to succeed John Donahoe as CEO.
Options and futures linked to stock indexes and individual stocks were set to expire simultaneously on Friday in an event known as “triple witching,” which helped lead to the heaviest trading volume day of the year.
Historically, equities have performed well in a rate-cutting environment. However, the outlook appears bleak with the S&P 500’s valuations high above its long-term average.
Declining issues outnumbered advancers by a 1.66-to-1 ratio on the NYSE and by a 1.87-to-1 ratio on the Nasdaq.
The S&P 500 posted 32 new 52-week highs and one new low while the Nasdaq Composite recorded 114 new highs and 105 new lows.
Volume on U.S. exchanges was 19.97 billion shares, compared with the 11.48-billion average for the full session over the last 20 trading days.
(Source: Reuters)
