The S&P 500 finished stronger on Friday and extended its winning streak to four consecutive sessions and moved some closer to record ground as fresh inflation news indicated further deflation in price pressures. With the Federal Reserve making its final policy announcement of the year next week, the recent figures were viewed by investors as another indication that a much-awaited reduction in the rate could finally be about to happen.
The index S&P 500 gained by 0.19 percent to 6,870.40, which is less than 1 percent of its all-time intraday high. The Nasdaq Composite rose by 0.31 percent to close at 23,578.13, and the Dow Jones Industrial Average increased by 104.05 points or 0.22 percent to close at 47,954.99. The three significant averages also ended the week in the green, with the Nasdaq leading the way by almost 1%.
Cooling PCE Data Reinforces Hopes for a December Rate Cut
Markets digested a long-awaited batch of economic data on Friday, including the Commerce Department’s delayed personal consumption expenditures index for September. The report — held up by the recent record-setting government shutdown — showed that core PCE, the Fed’s preferred inflation measure, rose 2.8% year over year, slightly below the 2.9% forecast.
On a monthly basis, core PCE increased 0.2%, matching consensus. Headline PCE also rose 0.3% for the month and 2.8% for the year, in line with expectations. The mild inflation readings give the central bank a clearer backdrop as policymakers head into Wednesday’s rate decision.
Investors are increasingly convinced that the Federal Reserve will lower its benchmark interest rate by 25 basis points next week. According to CME’s FedWatch tool, traders are now pricing an 87% probability of a cut — a sharp increase from earlier this month. The current federal funds rate sits between 3.75% and 4%, near the top of that range amid tightening pressures in short-term funding markets.
David Krakauer, vice president of portfolio management at Mercer Advisors, said the latest data underscores the market’s optimism. “It really just solidifies what the market’s already been pricing in, which is almost certainty of a cut for next week,” he told CNBC. Krakauer added that if inflation continues to cool, it opens the door for additional cuts in early 2026, although he doesn’t necessarily expect Wednesday’s decision to spark an immediate surge in equities.
Even without a dramatic catalyst, he believes the market remains well-positioned for gradual upside. He said, “The move might be steady or even a bit choppy, but I still see a very positive path ahead for equities.”
Consumer Sentiment Climbs, Labor Market Remains a Wild Card
Alongside inflation data, the University of Michigan’s consumer sentiment index for December came in higher than economists expected. The monthly survey offered an encouraging snapshot of Americans’ views on inflation and economic conditions heading into the new year.
The labor market remains under scrutiny despite the upturn, as a number of reports have pointed to a weakening in a number of recent months. The sluggish payrolls and the increase in unemployment claims have raised concerns regarding the viability of economic growth. Although lower inflation supports the case for rate cuts, the Fed must walk a fine line if the job market shows further weakness.
For now, markets appear confident that easing price pressures outweigh near-term employment jitters. The S&P 500 is up 0.3% week to date, while the Nasdaq has advanced nearly 1% and the Dow is up about 0.5%.
Netflix, WBD, and Streaming Sector Turmoil Dominate Headlines
Beyond the big economic concerns, investors on Friday focused on major moves in the media and tech sectors. Netflix shares swung sharply after the company announced a landmark $72 billion deal to buy Warner Bros. Discovery’s film studio and streaming assets. The deal includes HBO Max and major film franchises, and it is expected to close in 12 to 18 months.
Netflix stock dropped almost 3 percent, and Discovery, under the new Warner Bros. name, rose over 6 percent as the stock market digested the megabust buy. The deal would make Netflix the biggest combined content owner in Hollywood, putting pressure on other competitors, such as Paramount and Comcast, which also participated in the bid.
However, the political landscape added fresh uncertainty. A senior member of the Trump administration told CNBC that the White House views the deal with “heavy skepticism,” raising the possibility of regulatory challenges. Analysts also questioned the near-term financial impact. Rich Greenfield of LightShed Partners said the transaction could weigh on Netflix’s balance sheet initially, even if it proves advantageous in the long run. “The math is going to hurt Netflix for a while,” he said.
Elsewhere in the corporate earnings landscape, Salesforce surged 5% after strong quarterly results and is on track for its best week since 2023. Unity Software climbed more than 3% after Wells Fargo upgraded the stock, citing strong industry momentum and improvements in the company’s mobile payments strategy.
Outlook: All Eyes on the Fed as Markets Inch Toward Records
As the S&P 500 approaches an all-time high, and the trend of inflation data is moving in the right direction, markets seem to have a potential breakout. The Federal Reserve decision next week is huge, however. Every rate cut is now expected. But Fed Chair Jerome Powell’s message could decide what happens next. His words may either keep the stock market climbing or make investors pause and rethink the rally.
The mood on Wall Street is cautiously optimistic at this time. The reduction of inflation, the revival of consumer confidence, and the solid corporate performance are all indicative that conditions are forming a positive end to the year 2025. As Krakauer noted, even if gains come slowly, the trajectory for equities remains encouraging — at least for now.