Wall Street extended its rebound after November's pullback, although with less momentum than the previous week, as risk appetite remained supported by expectations of another Federal Reserve rate cut.
Investors widely expect the Fed to deliver a 25-basis-point cut on Dec. 10 — the third consecutive reduction — with market-implied odds approaching 90%.
Economic data released throughout the week painted a mixed picture. ADP reported that private employers cut 32,000 jobs in November, while Challenger, Grey & Christmas recorded 71,321 announced layoffs last month.
However, initial jobless claims dropped sharply in the last week of November, falling 27,000 to 191,000, according to the Labor Department. The holiday week — typically prone to swings — still produced a fourth consecutive decline, with filings undershooting the 220,000 estimate and hitting their lowest point since September 2022.
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On the positive side, the Fed's preferred inflation gauge shows no signs of re-accelerating, while consumer sentiment posted a welcome rebound after touching recession-like levels in November.
September's core Personal Consumption Expenditures price index — released weeks late due to the government shutdown — slowed from 2.9% to 2.8% year over year, marking the first deceleration in four months.
Meanwhile, the University of Michigan's consumer survey showed the headline sentiment index jumping from 51 to 55, the highest since August.
Joanne Hsu, director of the Surveys of Consumers, said the modest improvement was "concentrated primarily among younger consumers" and driven by a 13% increase in expected personal finances.
Yet, while inflation expectations cooled slightly from November, consumers still foresee price growth running well above the Fed's 2% target.
"The overall tenor of views is broadly somber, as consumers continue to cite the burden of high prices," Hsu said.
On Wall Street, Microchip Technology Inc. (NASDAQ:MCHP) was the S&P 500’s top weekly performer, up 24%, following upward revisions to earnings. On the downside, Paramount Skydance Corp. (NASDAQ:PSKY) was the week’s biggest laggard, sinking 14% — including a 7% drop Friday — after Netflix Inc. (NASDAQ:NFLX) announced Warner Bros. Discovery (NASDAQ:WBD) had accepted its acquisition offer, pending regulatory approval.
Looking ahead to 2026, investors continue to anticipate at least two additional Fed rate cuts, driven partly by expectations of a leadership change at the central bank.
Chair Jerome Powell's term ends in May, and Kevin Hassett — the current National Economic Council director — is widely seen as the frontrunner for the role, with markets viewing him as a notably more dovish voice that places greater emphasis on labor-market strength than on inflation risks.
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Image created using artificial intelligence via Midjourney.
