Stocks opened higher Friday and kept climbing into the close as optimism builds ahead of next week's Federal Reserve policy announcement.
The Fed is all but certain to lower the federal funds rate from its current 23-year high when its latest meeting concludes on Wednesday afternoon, with most now bickering between whether it will be 25 basis points (0.25%) or 50 basis points (0.50%).
Current Fed officials are in a blackout period this week, notes Mark Hackett, chief of investment research at Nationwide, but points out that former New York Fed President Bill Dudley threw his support behind a half-percentage point cut on Friday. However, Hackett notes that "the Fed has historically been hesitant to surprise the market," which raises the odds of a quarter-point cut "to avoid alarming markets."
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According to CME Group's FedWatch Tool, futures traders are pricing in a 53% probability for a 0.25% cut and a 47% chance it'll be 0.50%. One day ago, these odds were at 72% and 38%, respectively.
Consumer sentiment improves in August
On today's economic calendar, the University of Michigan said its Consumer Sentiment Index rose 1.6% in September from the month prior. Consumers viewed prices for durable goods as more favorable, says Joanne Hsu, director of the surveys of consumers at the University of Michigan. However, they remain guarded ahead of the November presidential election, she adds.
While consumers' long-run inflation expectations edged up, year-ahead inflation expectations fell for a fourth straight month, hitting their lowest level since December 2020.
Boeing sinks as workers strike
In single-stock news, Boeing (BA) made headlines after the embattled aircraft maker's largest union voted to strike. The roughly 33,000 aircraft assembly workers overwhelmingly rejected a tentative wage-increase contract and walked off the job at Boeing factories near Seattle.
This is just the latest setback for the aerospace firm whose share price has plummeted 40% for the year to date. Today, BA slumped 3.6%, making it the worst Dow Jones stock.
And according to Vertical Research Partners analyst Robert Stallard, the blue chip stock could have further to fall. According to MarketWatch, the analyst says that following Boeing's last worker strike in 2008, its share price fell 33% between the time the strike started and when a tentative deal was agreed upon.
Of course, past price performance is no guarantee of future returns. And Stallard admits that this prior strike overlapped with the Great Financial Crisis. But BA shares were up more than 2% for the week through Thursday's close, so it doesn't seem like Wall Street was pricing in the possibility of a strike, he adds.
Adobe sinks on disappointing revenue outlook
Adobe (ADBE) was another notable loser Friday, sinking 8.5% after the Creative Cloud parent reported earnings. For its fiscal third quarter, ADBE disclosed earnings of $4.65 per share on $5.4 billion in revenue, beating analysts' estimates.
However, the company's fiscal fourth-quarter guidance was below what Wall Street was expecting.
"Adobe continues to experience strong demand for its generative AI offerings across enterprise and individual customers," says William Blair analyst Jake Roberge (Outperform, the equivalent of a Buy). Despite the weak outlook, the analyst remains "positive on the long-term trajectory of the business, especially as it relates to the company’s ability to capitalize on the opportunity with GenAI."
As for the major indexes, the Dow Jones Industrial Average rose 0.7% to 41,393, the S&P 500 added 0.5% to 5,626, and the Nasdaq Composite gained 0.7% to 17,683. All three benchmarks were up between 2.5% and 6% on the week.
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