4:10pm: Markets rebound to close higher
Stocks closed higher on Friday, capping off a volatile week marked by Federal Reserve interest rate projections and potential government shutdown concerns.
The Dow Jones Industrial Average rallied 1.2% to close at 42,840, breaking its previous ten-session losing streak—the longest since 1974. The S&P 500 advanced 1.1% to 5,931, while the Nasdaq gained 1% to reach 19,5732.
The market's positive close was driven by encouraging inflation data and a slight easing of earlier market tensions. Despite the day's gains, major indexes are still set to post weekly losses following the Federal Reserve's more hawkish stance on potential interest rate cuts in 2025.
2:52pm: How the Grinch stole the Santa rally
A grim week for equities on both sides of the Atlantic has dashed hopes of a Santa Rally this year.
In stark contrast with Santa Rallies of the past, London’s blue-chip index, the FTSE 100, had dropped 2.6% by Friday in its final full week before the shortened Christmas week.
The scene was by no means pretty across the Atlantic in the meantime, with the Dow Jones off 2.7%, S&P 500 down 2.6% and Nasdaq 2.7% lower.
Historically, the S&P 500 delivered a positive return in the seven trading days around Christmas - five before and two after - in 58 of the 73 years of its existence up to 2022, according to IG Group.
London’s FTSE 100 has ticked up by an average 2.3% over the same period since its inception in 1984.
1:50pm: Shutdown looms
The US government is on the brink of a shutdown as lawmakers struggle to pass a funding bill beyond December 20.
Analysts at Wells Fargo noted that a shutdown affects about 25% of federal spending, specifically "discretionary" areas, while "mandatory" programs like Social Security and Medicare remain unaffected.
Efforts to pass a new CR extending funding into March have stalled due to disagreements over policy riders, including disaster aid and healthcare.
A prolonged shutdown would heighten economic and policy uncertainty, with another budget battle likely early next year.
"Not only would a shutdown reduce economic growth modestly, but it would create a data vacuum at a time when the path ahead for the economy remains uncertain," Wells Fardo analysts wrote.
"A shutdown could delay influential economic data reports published by government agencies, as employees involved in collecting and processing the information are deemed non-essential."
12:55pm: Stocks move higher
Stocks continued to climb on Friday afternoon as investors reacted to lower-than-expected inflation data.
The Dow Jones Industrial Average was up 1.9%, signaling a recovery from earlier losses. Similarly, the S&P 500 posted a 1.9% increase, reflecting broad-based strength across multiple sectors. The Nasdaq also rose by 1.9%, driven largely by positive movements in technology stocks.
Despite ongoing concerns about a possible government shutdown and recent market volatility, the midday rally highlights the resilience of traders as they digest the latest economic data and recalibrate their positions.
11:40am: FexEx surges
Markets are rebounding from recent volatility, with the Dow Jones, S&P 500, and Nasdaq all bouncing back by approximately 1.6%.
Among individual stocks, FedEx is surging by 8% in premarket trading following its announcement to spin off its Freight unit. On the downside, Novo Nordisk (NYSE:NVO) is seeing a 19% drop after disappointing data for its obesity treatment, CagriSema, while Nike shares are lower after the company warned of a potential revenue decline in the current quarter.
10:45am: Taking the edge off
Lower-than-expected inflation data helped ease some of the negative sentiment after a rough week in the markets, according to Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management.
"The market woke up in a terrible mood – an unexpected government shutdown and a more-hawkish-than-expected Fed are to blame – but this morning’s inflation data came in lower-than-expected and took some of the edge off," Zaccarelli commented.
"We expect the market will continue to sell off into the weekend, but we will be watching the last 15 minutes of trading today to see how we finish. If the selling builds throughout the day and there is momentum (to the downside) heading into the weekend then that would be a bad sign for next week, however, if we see some dip-buying later today and the market finishes significantly higher than the lows of the day would suggest, then that would make us more optimistic for next week."
9.46am: Mixed start on Wall Street
Wall Street faced a mixed start on Friday as sentiment faced pressure on uncertainty around a potential government shutdown.
The Dow Jones moved 0.1% higher early on, though the Nasdaq and S&P 500 fell by 0.6% and 0.1% respectively.
Figures earlier in the day had shown core personal consumption expenditures, which is the Federal Reserve’s preferred measure of inflation, below forecasts for November.
According to the US Commerce Department, the index climbed by 2.8% year on year in November, against expectations for a 2.9% increase.
Uncertainty remained on whether Congress would be able to pass a bill preventing a government shutdown ahead of a deadline of midnight on Friday though.
A Donald Trump-backed spending bill for three months worth of funding was rejected earlier, threatening to see non-essential federal workers sent home from jobs.
8.01am: Fed’s preferred measure of inflation undershoots forecast
Core personal consumption expenditures remained unchanged in November and sat below expectations as a result, figures showed on Friday.
According to the US Commerce Department, the Fed’s preferred measure of inflation came in at 2.8% year on year in November.
Analysts had expected a reading of 2.9%, with the headline figure of 2.4% also below anticipations for 2.5%.
Futures continued to show US stocks down ahead of Friday's open after the figures.
6.59am: Wall Street set for another tough day
Wall Street looked on course to tumble further on Friday as caution ahead of further inflation figures and threat of a government shutdown hampered sentiment again.
Futures had the Nasdaq down 1.3% ahead of the opening bell, while the S&P 500 and Dow Jones were seen 0.8% and 0.4% lower respectively.
Another drop would worsen declines that have already seen the Nasdaq, Dow and S&P tumble this week on hawkish commentary from the Federal Reserve on Wednesday.
Attention on Friday is set to turn to the Fed’s preferred measure of inflation in personal consumption expenditures data, after Wednesday saw its rate cut expectations for the coming year halved.
Expectations are for the core rate to have increased by 2.9% on an annual basis in November, against October’s 2.8%, with the monthly figure up 0.2%.
Further clouding sentiment on Friday was renewed fears over a government shutdown after a Donald Trump-endorsed spending bill was rejected by US politicians.
Congress has been left with a deadline of midnight on Friday to avert a shutdown, which would see non-essential federal employees sent home from jobs, with a new bill.