Wall Street Review: Stocks Hover Near Records Ahead of Fed Meeting

Cooling labor data, easing inflation, and firmer consumer sentiment boosted expectations for further Federal Reserve rate cuts next week.

Panos Mourdoukoutas

Published: 12/6/2025, 8:14:38 AM EST

Wall Street Review: Stocks Hover Near Records Ahead of Fed Meeting — Traders work on the floor of the New York Stock Exchange after the opening bell on Dec. 5, 2025. (Angela Weiss/AFP via Getty Images)

Equities extended last week’s rebound as cooling labor market indicators, moderating inflation, and steadier consumer sentiment bolstered expectations that the Federal Reserve could continue to cut interest rates at next week’s policy meeting. Lower interest rates would mark a significant shift in market direction and investor strategy.

Technology shares and small cap stocks—typically the most sensitive to rate changes—led the advance.

The Dow Jones Industrial Average rose 0.50 percent for the week to 47,954, near its intraday high in early trading on Dec. 5. The S&P 500 gained 0.31 percent to 6,870, closing just shy of a record. The Nasdaq Composite and Russell 2000 posted the strongest performances, rising 0.91 percent and 0.84 percent, respectively, both approaching all-time highs.

Market volatility continued to ease. The Chicago Board Options Exchange Volatility Index fell 5.75 percent following last week’s 30 percent slide, reaching 15.41.

Stocks opened sharply lower on Dec. 1 as bond yields climbed. The benchmark 10-year Treasury yield touched 4.07 percent in early trading, continuing a rebound that began Nov. 28. Global yields also rose after Japanese 10-year government bond yields increased, pushing the yen higher against the dollar.

Japanese government bond yields reached their highest level since 2008 amid expectations that the Bank of Japan could raise rates this month. A widening rate gap—if the Fed cuts rates while Japan tightens—could make Japanese debt more attractive than U.S. debt, potentially reversing the long-running “yen carry trade.”

Utilities and homebuilders, among the most rate-sensitive groups, led the session’s decline. Losses moderated as dip-buyers stepped in, targeting prominent tech names such as Nvidia and Apple, which had lagged the broader market the previous week. Still, all major indexes finished the day lower, with the Dow down by 0.90 percent.

Markets rebounded on Dec. 2 after the Organization for Economic Co-operation and Development issued an outlook stating the global economy remains resilient, with slowing inflation and steady growth, but no recession on the horizon.

The agency projects U.S. GDP growth of 1.7 percent in 2026 and 1.9 percent in 2027, down from 2 percent in 2025. The eurozone is expected to grow 1.3 percent in 2025, 1.2 percent in 2026, and 1.4 percent in 2027. China’s economy is forecast to slow from 5 percent in 2025 to 4.3 percent in 2027.

Inflation across G20 economies is projected to cool from 3.4 percent this year to 2.9 percent in 2026 and 2.5 percent in 2027, with most major countries approaching target levels by mid-2027.

Bond yields eased following the jump on Dec. 1, with the 10-year Treasury slipping to 4.09 percent after trading near 4.12 percent earlier.

Boeing added support to large-cap indexes, gaining 10 percent on an uptick in aircraft deliveries. Major averages closed higher, led by the Nasdaq’s 0.59 percent rise, boosted by Intel’s announcement that it will supply chips to Apple.

Stocks regained momentum on Dec. 3 after private payroll data from ADP pointed to further cooling in the labor market. U.S. businesses cut 32,000 jobs in November, following an upwardly revised 47,000 increase in October, sharply missing expectations for a 10,000 gain.

The decline—driven by a 120,000 drop in small-business employment—was the most significant monthly cut since March 2023 and heightened expectations of a Federal Reserve rate cut. Interest-rate-sensitive sectors, including transportation, homebuilding, and financials, rallied, lifting all major indexes, led by the Russell 2000.

Trading turned volatile on Dec. 4 after a competing labor report showed unexpected strength. Initial jobless claims for the week ending Nov. 29 fell by 27,000 to 191,000, marking a fourth straight decline and the lowest level since September 2022.

The sharp drop contrasted with the prior day’s ADP report, leaving investors puzzled. The ADP data covers only private-sector jobs, while initial claims include both private- and government-sector jobs.

Bond yields rose in response, with the 10-year Treasury climbing back toward 4.10 percent.

Major indexes ended mixed, with the S&P 500, Nasdaq, and Russell 2000 closing slightly higher while the Dow edged lower.

Markets turned decisively higher on Dec. 5 after two key economic reports supported expectations of a Federal Reserve rate cut. The central bank’s preferred inflation gauge, the Personal Consumption Expenditures price index, rose 2.8 percent year over year in September, matching expectations and slightly above August’s 2.7 percent.

Separately, the University of Michigan Consumer Sentiment Index improved to 53.3 in December from 51 in November, exceeding forecasts. The rise was driven by improving expectations and a 13 percent increase in anticipated personal finances among younger consumers.

The steady data helped reinforce confidence that the Federal may move to cut rates at next week’s meeting.

From The Epoch Times