U.S. stock markets ended sharply higher on Friday after a choppy session. Wall Street recorded its first close in positive territory in 2025. Market participants will closely monitor the economic policies of the newly-elected Trump administration as well as interest rate related decisions of the Fed. The three major stock indexes ended in the green. However, these indexes finished in negative zone in the last truncated week. 

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) gained 0.8% or 339.86 points to close at 42,732.13. The blue-chip index terminated a eight-day losing streak. Notably, 24 components of the 30-stock index ended in positive territory while 4 in negative zone. 

The tech-heavy Nasdaq Composite finished at 19,621.68, advancing 1.8% or 340.88 points due to strong performance by technology behemoths. The tech-laden index terminated a 5-day losing streak. 

The Nasdaq-listed Cerence Inc. CRNC, which provides AI-powered assistants to autonomous vehicles, soared 143.8% after expanding its partnership with NVIDIA Corp. NVDA. Cerence currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The S&P 500 appreciated 1.3% to finish at 5,942.47. Nine out of 11 broad sectors of the broad-market index ended in positive territory and two in negative zone. The Consumer Discretionary Select Sector SPDR (XLY), the Technology Select Sector SPDR (XLK), the Health Care Select Sector (XLV), the Industrials Select Sector SPDR (XLI), the Real Estate Select Sector SPDR (XLRE) and the Utilities Sector SPDR (XLU) rose 2%, 1.6%, 1%, 1.1%, 1.4% and 1.1%, respectively. 

The fear-gauge CBOE Volatility Index (VIX) was down 10%% to 16.13. A total of 14.09 billion shares were traded on Friday, lower than the last 20-session average of 14.91 billion. Advancers outnumbered decliners on the NYSE by a 3.03-to-1 ratio. On Nasdaq, a 2.69-to-1 ratio favored advancing issues. 

Trump’s Policies

Market participants are uncertain regarding Donald Trump’s economic policies. Trump’s popular policies like the reduction of corporate tax, deregulation and imposition of tariffs on foreign products are expected to boost economic growth, especially for the domestic industries. At the same time, these policies may lead to a higher inflation rate, making it harder for the Fed’s goal of a soft landing of the economy.

Fed’s Interest Rate Cut

Market participants remained uncertain regarding the Fed’s interest rate cut in 2025. The central bank has reduced the benchmark lending rate by 1% in the last three FOMC meetings of this year. The Fed fund rate is currently in the range of 4.25-4.5%. In December, the Fed’s latest “dot-plot” showed just two rate cuts of 25 basis points in 2025 instead of four indicated in September. 

Economic Data

The Institute of Supply Management reported that the manufacturing PMI (purchasing managers’ index) for December came in at 49.3, beating the consensus mark of 48. The metric for November was 48.4. However, economic activity in the manufacturing sector contracted in December for the ninth consecutive month and the 25th time in the last 26 months. Any reading below 50 indicates contraction of manufacturing activities. 

New orders index for December was 52.5 compared with 50.4 in November. Backlog of orders index came in at 45.9 in December compared with 41.8 in November. Production index for December and November stood at 50.3 and 46.8, respectively. Employment index came in at 54.3 and 48.1 in December and November, respectively. Prices index for December was 52.5 compared with 50.3 in November.

Weekly Roundup

The truncated last week, in which Wall Street completed 2024 and entered 2025, was a disappointing one. The Dow, the S&P 500 and the Nasdaq Composite fell 0.6%, 0.5% and 0.5%, respectively. Investors remained concerned about highly overvalued U.S. stocks following an impressive bull run of the last two years.

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