In a notable midday trading session on Friday, US equity indexes experienced a significant uptick while most government bond yields declined, propelled by intensifying bets in favor of a 50 basis-point cut in interest rates predicted for next week. The S&P 500 index climbed 0.6%, reaching 5,631.3, while the Nasdaq Composite saw a gain of 0.7%, peaking at 17,701.1.
The Dow Jones Industrial Average followed suit, rising 0.8% to 41,436.5. This upward trend was observed across all sectors intraday, with the materials and utilities sectors leading as the top gainers. As the market anticipates the Federal Reserve's monetary policy announcement scheduled for September 18, the probability for a 50-basis point cut in rates surged dramatically from 13% on Thursday afternoon to 43% by midday Friday, as per the CME Group's FedWatch Tool.
In contrast, the likelihood for a 25-basis point cut stood at 57%, significantly down from 87% during the same timeframe. Making headlines at a finance forum in Singapore, former New York Fed President Bill Dudley emphasized that "there's a strong case for 50," as reported by Reuters. Analysts from Deutsche Bank pointed out that recent coverage from major financial publications like The Wall Street Journal and Financial Times has further fueled speculation regarding the potential for a 50 basis-point rate cut, thereby influencing traders' expectations, as noted in a commentary by FXEmpire. During intraday trade, most Treasury yields saw declines, including a 3.2 basis point drop in the 10-year yield to 3.65%, while the two-year rate fell 6.8 basis points to 3.58%. In precious metals, gold experienced a robust increase of 1.2%, rising to $2,612.40 per ounce, while silver surged by 3.5%, reaching $31.16. In the realm of economic indicators, the University of Michigan's preliminary consumer sentiment index rose to 69 in September, an increase from August's 67.9, surpassing forecasts of an elevation to 68.5 per a survey executed by Bloomberg.
While September's consumer sentiment figures mark the strongest since May, it is noteworthy that the index had peaked in March at 79.4. "The steep decline since then is concerning," remarked analysts from Jefferies. Respondents in the Michigan survey noted one-year inflation expectations at 2.7%, the lowest observed since December 2020, reflecting a decrease from 2.8% in August.
Additionally, five-year inflation expectations rose to 3.1%, up from a consistent 3% over the preceding five months. On a separate note, US import prices fell by 0.3% in August, which was below the anticipated 0.2% decline per a Bloomberg survey, following a slight increase of 0.1% in July. Export prices also tumbled by 0.7% in August, underperforming expectations for a 0.2% decrease and a previous gain of 0.5% in July. In specific company news, shares of Adobe ($ADBE) plummeted by 9% during intraday trading, making it the worst performer among both the S&P 500 and Nasdaq indexes after the company issued a Q4 revenue outlook that fell short of market expectations.
Following the disappointing results released late Thursday, Fubon downgraded Adobe to a neutral rating, setting a price target of $610. Citigroup also adjusted its price target downward to $616 from $621, while Bernstein revised its target from $660 to $644. In commodities, West Texas Intermediate crude oil futures traded relatively unchanged at $68.96 per barrel..