US: Wall St closes with slight gains as data keeps Fed cut expectations on track

US stocks closed out the trading week with slight gains on Friday (Dec 5) 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 per cent in September to match the estimate of economists polled by Reuters, after a downwardly revised 0.5 per cent gain in August.

In addition, the Personal Consumption Expenditures Price Index increased 0.3 per cent after gaining 0.3 per cent in August, the Bureau of Economic Analysis said. In the 12 months through September, the PCE Price Index advanced 2.8 per cent after rising 2.7 per cent 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 per cent 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 per cent 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.”

The Dow Jones Industrial Average rose 104.05 points, or 0.2 per cent, to 47,954.99, the S&P 500 gained 13.28 points, or 0.2 per cent, to 6,870.40, and the Nasdaq Composite gained 72.99 points, or 0.3 per cent, to 23,578.13.

For the week, the S&P 500 gained 0.3 per cent, the Nasdaq rose 0.9 per cent, and the Dow climbed 0.5 per cent. All three indices recorded a second straight weekly advance.

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