Wall Street Rallies as Investors Bet on Aggressive Fed Action

US stocks climbed higher on Friday, setting the stage for a strong weekly performance as Wall Street's expectations for a more substantial interest rate cut by the Federal Reserve surged overnight. The market's renewed optimism comes amid growing speculation that the central bank may opt for a more aggressive policy move to address economic concerns.

Investors Anticipate Bolder Fed Intervention

Stocks Climb on Heightened Rate Cut Expectations

The S&P 500 (^GSPC) rose approximately 0.2%, while the tech-heavy Nasdaq Composite (^IXIC) edged up slightly, marking a fifth consecutive day of gains for both indexes. The Dow Jones Industrial Average (^DJI) also added around 0.2%. This upward momentum reflects the market's growing belief that the Federal Reserve will take more decisive action to stimulate the economy.Traders are now pricing in a 49% chance of a 50-basis-point rate cut at the Fed's upcoming meeting, a significant increase from the 15% probability seen at one point on Thursday. This shift in sentiment comes as reports from the Financial Times and The Wall Street Journal suggest that the size of the Fed's September 18 decision will be a close call, with influential former New York Fed president Bill Dudley stating that there is a "strong case" for a deeper cut.

Yields Decline as Investors Anticipate Fed Action

The yield on the benchmark 10-year Treasury (^TNX) slipped early Friday, down 2 basis points to around 3.66%. Simultaneously, the yield on 2-year notes, which are seen as more sensitive to monetary policy, dropped to just above 3.58%. This decline in yields reflects the market's expectation of a more accommodative stance from the Fed, as investors anticipate the central bank's efforts to stimulate the economy.

Volatility Persists Amid Shifting Rate Cut Expectations

Markets have been subject to significant volatility in recent days, as speculation has swirled around whether the Fed will opt for a quarter-point or a half-point rate cut at its upcoming meeting. Concerns about a potential slowdown in the labor market and the risk of a recession have contributed to this market uncertainty, which Wall Street believes could persist if a 0.5% cut is implemented.

Individual Stock Movements Reflect Shifting Investor Sentiment

In individual stock news, Adobe (ADBE) shares declined in morning trading after the software maker's outlook failed to show a significant uplift from its AI push. Conversely, Oracle (ORCL) stock rose again, buoyed by an upbeat forecast for a surge in revenue over the next five years, driven by strong cloud demand.Meanwhile, Boeing (BA) shares pulled back as factory workers walked out on strike, halting manufacturing across the planemaker's Seattle hub, its largest production facility.These divergent stock movements underscore the complex and dynamic nature of the current market environment, as investors navigate the shifting landscape of economic indicators, corporate performance, and the anticipated actions of the Federal Reserve.