In midday trading on Friday, US equity indexes experienced a notable rise, while yields on most government bonds saw a decline. This shift came as investor sentiment increasingly favored a potential 50 basis-point cut in interest rates expected next week. The S&P 500 index climbed 0.6% to reach 5,628.7, mirroring the performance of the Nasdaq Composite, which also increased by 0.6% to 17,678.4.
Meanwhile, the Dow Jones Industrial Average saw a more substantial rise of 0.9%, settling at 41,476.2. The uptick was broad-based, with gains in all sectors, particularly in materials and industrials, leading the day’s advancements. Attention now turns to the Federal Reserve’s upcoming monetary policy announcement scheduled for September 18.
As of midday Friday, the probability of a 50 basis-point cut in interest rates surged to 43%, a significant jump from the previous day's 13%. In contrast, the likelihood of a 25 basis-point reduction diminished to 57% from 87% during the same comparative timeframe, according to data from the CME Group's FedWatch Tool. During a forum in Singapore, former New York Federal Reserve President Bill Dudley remarked that "there's a strong case for 50" basis points, a sentiment echoed by increasing expectations across the market.
Analysts from Deutsche Bank pointed out that reputable financial publications, including The Wall Street Journal and the Financial Times, have presented arguments supporting a 50 basis-point cut. This media attention has encouraged traders to revise their forecasts, as cited by a note from FXEmpire. In the realm of Treasury yields, most experienced a retreat; the 10-year yield dipped by 2.5 basis points to 3.66%, while the two-year yield fell a more considerable 5.9 basis points to 3.59%. On the economic front, updates on consumer sentiment were released on Friday.
The University of Michigan’s preliminary consumer sentiment index advanced to 69 in September, a rise from 67.9 in August, and exceeding expectations which predicted an increase to 68.5 based on a Bloomberg survey. Michigan officials described this uptick as the highest consumer sentiment measure since May 2024. Crude oil prices also saw an upswing, with West Texas Intermediate crude rising 0.6% to $69.35 per barrel, reflecting ongoing fluctuations in the energy market.
In corporate news, Adobe, noted by its stock symbol $ADBE, witnessed a steep decline of over 9% in share price amid heightened trading volume. This drop followed a disappointing Q4 revenue outlook that fell short of market expectations. Following these results, Fubon has downgraded Adobe to a neutral rating, setting a price target of $610.
Citigroup adjusted its price target down to $616 from a previous $621, while Bernstein revised it to $644, down from $660..