Wall Street stocks ended their strongest week in the last five, buoyed by rising confidence that the Federal Reserve will cut interest rates for the first time this year. On Friday, the S&P 500 edged down by less than 0.1% from its all-time high, the Dow Jones Industrial Average dipped 0.6%, and the Nasdaq composite rose 0.4%.
The rally has been fueled by optimism that the U.S. economy is slowing just enough to convince the Fed to ease policy, while avoiding a recession. Markets have already priced in multiple cuts for 2025, with traders betting on as many as three.
The Fed’s Role in the Rally
Expectations for rate cuts are the central driver of Wall Street stocks right now. Recent job market reports suggested the economy is cooling, but not collapsing. Inflation data has also supported the view that consumer prices are stabilizing.
A University of Michigan survey showed short-term inflation expectations holding steady at 4.8%. Longer-term inflation outlooks rose slightly, but remain below April’s levels, when former President Donald Trump announced sweeping tariffs.
Lower rates would provide relief across the economy, including cheaper mortgages and business financing. However, if the Fed cuts fewer times than expected, markets could face disappointment.
Corporate Movers Behind Wall Street Stocks
Several big names influenced Wall Street stocks on Friday:
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Oracle (NYSE:ORCL) dropped 4.1% after a strong surge earlier in the week, when it rallied on multibillion-dollar AI contracts. Despite Friday’s dip, it remains one of the week’s standout winners.
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Super Micro Computer (NASDAQ:SMCI) gained 2.9% after announcing mass shipments of AI servers powered by Nvidia’s (NASDAQ:NVDA) Blackwell Ultra chips, solidifying its role in the AI supply chain.
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Microsoft (NASDAQ:MSFT) climbed 2% after European Union regulators accepted its changes to unbundle Teams from Office, resolving an antitrust probe that had weighed on the company.
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RH (NYSE:RH) fell 4.7% after reporting weaker-than-expected earnings and cutting revenue forecasts. The company blamed tariffs and a housing market slump for its struggles.
These stock moves highlight the mixed corporate picture driving Wall Street stocks, with AI-focused firms continuing to shine while consumer-sensitive companies lag.
Global Markets and Treasury Yields
Wall Street’s momentum was mirrored abroad. Japan’s Nikkei 225 jumped 0.9% to a fresh record, while Hong Kong’s Hang Seng climbed 1.2%. European markets were more subdued, edging lower after a week of gains.
In the bond market, the 10-year Treasury yield rose to 4.07% from 4.01% a day earlier. Yields have broadly trended downward on expectations of Fed rate cuts, though Friday’s bounce reflected profit-taking after earlier declines.
Political Tensions Add Uncertainty
Beyond economic data, politics remain a wildcard for Wall Street stocks. President Donald Trump has clashed openly with the Federal Reserve, criticizing Chair Jerome Powell and even attempting to remove Governor Lisa Cook from the board. A federal judge recently blocked the effort, reinstating her just ahead of the Fed’s key policy meeting next week.
Markets are watching closely to see how this tension plays out, as political pressure on the Fed could inject volatility into Wall Street stocks if investor confidence in the central bank’s independence falters.
The Road Ahead for Wall Street Stocks
The rally in Wall Street stocks is rooted in expectations, not results. Investors are betting heavily that the Fed will deliver rate cuts and that inflation will remain under control. Any surprise—whether from stubborn inflation, slower-than-expected cuts, or political turmoil—could send stocks tumbling from record highs.
For now, momentum favors the bulls. AI innovation, strong corporate earnings from select firms, and global optimism are keeping Wall Street stocks elevated. But with so much riding on the Fed’s decision, the coming week could set the tone for the rest of 2025.
Featured Image – Freepik
