(Recasts with preliminary close of trading)
Warner Bros gains after Netflix agrees to buy the company
Investors assess inflation and consumer sentiment data
Ulta Beauty soars after raising forecasts
NEW YORK, Dec 5 (Reuters) – U.S. stocks closed out the trading week with slight gains on Friday as the latest flurry of economic data kept elevated expectations for a Federal Reserve interest rate cut next week intact.
In the wake of the 43-day government shutdown, market participants have been digesting delayed economic data as the backlog slowly dwindles, while also looking to secondary indicators to gauge the health of the economy. Delayed data from the Commerce Department showed consumer spending, which accounts for more than two-thirds of economic activity, rose 0.3% in September to match the estimate of economists polled by Reuters, after a downwardly revised 0.5% gain in August.
In addition, the Personal Consumption Expenditures Price Index increased 0.3% after gaining 0.3% in August, the Bureau of Economic Analysis said. In the 12 months through September, the PCE Price Index advanced 2.8% after rising 2.7% in August. Both were in line with forecasts. A separate report from the University of Michigan’s Surveys of Consumers showed consumer sentiment improved in early December to 53.3, topping the 52 forecast. Markets were pricing in an 87.2% chance of a 25-basis-point rate cut at this month’s Fed meeting, according to CME’s FedWatch Tool, although the meeting is expected to have a large number of dissenting voters over concerns about persistent inflation. Expectations for a cut were below 30% two weeks ago until several Fed officials voiced support for a rate reduction. “Investors are looking ahead to next week. We get a little bit more in the way of economic data … but all eyes will be on the Fed meeting on Wednesday, and right now there’s a very high likelihood the Fed will cut rates by another quarter point,” said Michael Sheldon, vice president and senior portfolio manager at Washington Trust Wealth Management, in New Haven, Connecticut.
“Then, the question is what they say following the meeting and whether they give any hints about future policy.”
According to preliminary data, the S&P 500 gained 11.95 points, or 0.17%, to end at 6,869.07 points, while the Nasdaq Composite gained 69.81 points, or 0.30%, to 23,574.95. The Dow Jones Industrial Average rose 93.20 points, or 0.19%, to 47,944.14.
All three indexes recorded a second straight weekly advance. Shares of Warner Bros Discovery climbed after Netflix agreed to buy its TV, film studios, and streaming division for $72 billion, ending a weeks-long bidding war. Netflix shares closed lower, while Paramount Skydance, one of the other bidders for Warner Bros, tumbled. The S&P 500 healthcare index declined after a group of vaccine advisers scrapped a longstanding recommendation that all U.S. children receive the hepatitis B shot at birth.
Communication services was the best-performing of the 11 S&P 500 sectors.
The benchmark S&P 500 is about 1% shy of a record high, but small cap stocks have rallied strongly over the past two weeks with the Russell 2000 up nearly 1% this week after a 5.5% jump last week as they are seen as likely to benefit strongly from rate cuts.
“All the low-quality, unprofitable, highly levered businesses have been high beta, high volatility, that’s been the best performing stocks,” said Jed Ellerbroek, portfolio manager at Argent Capital Management in St. Louis.
“A lot of that is just due to rates coming down a fair amount and expectations for rates to come down further.” Ulta Beauty surged after the beauty retailer raised its annual sales and profit forecasts.
(Reporting by Chuck Mikolajczak in New York; Additional reporting by Caroline Valetkevitch in New York, Johann M Cherian, Pranav Kashyap, Twesha Dixit and Purvi Agarwal in Bengaluru; Editing by Tasim Zahid and Matthew Lewis)
