In a bullish finish to the week, the S&P 500 closed marginally higher, securing its lengthiest weekly winning streak since 2017. Key inflation data, revealing a more significant than anticipated cooling of inflation, fueled expectations of accelerated and more profound Federal Reserve rate cuts, further strengthening the bulls’ control over stocks as the market headed into the extended holiday weekend.

By 16:00 ET (21:00 GMT), the S&P 500 Futures marked a 0.2% increase, Nasdaq 100 Futures experienced a 0.2% rise, and the Dow displayed a modest dip of 0.1%, down 18 points. These metrics encapsulated an unprecedented eighth consecutive positive week, a milestone last achieved by the S&P 500 in 2017 and the DJIA in 2019.

Fed Pivot Signals as Disinflation Gains Momentum

The momentum of the Federal Reserve’s policy shift persisted, fueled by a notable slowdown in inflation. The November personal consumption expenditures report, the Fed’s primary inflation metric, revealed a 0.1% deceleration, resulting in an annualized rate of 2.6% through November, below the projected 2.8%. The core measure, excluding volatile food and energy costs, a more critical indicator of underlying inflation, exhibited a 0.1% slowdown, surpassing expectations for 0.2%.

Perceived signs of an accelerated slowdown in inflation heightened expectations for an imminent rate cut. According to Investing.com’s Fed Rate Monitor Tool, the probability of a March cut surged to 85%, up from the previous day’s 75%. Investors are now anticipating a 175-basis-point cut by the end of the next year, projecting the Fed funds rate to a range of 3.5% to 3.75%. This forecast, significantly more aggressive than the three rate cuts projected by the Fed for 2024 at its December meeting.

Corporate Highlights: Nike and Tesla

Nike (NYSE:NKE) experienced a nearly 12% decline in its shares as the company adjusted its annual sales forecast, citing a softer second-half revenue outlook due to cautious consumer spending. The sportswear giant revised its full fiscal-year revenue growth to approximately 1%, down from the previous mid-single-digit percentage forecast. Nike also outlined plans to cut up to $2 billion in costs over a three-year period, equivalent to 50% of its annual demand creation expense budget.

Meanwhile, Tesla (NASDAQ:TSLA) faced a slight downturn as it initiated the recall of over 120,000 Model S and Model X vehicles in the U.S. The recall was prompted by concerns about cabin doors being unlocked during a crash, according to the country’s road safety regulator.

Notable Market Moves: Karuna Therapeutics and Rocket Lab

Karuna Therapeutics Inc (NASDAQ:KRTX) surged nearly 48% after Bristol-Myers Squibb Company (NYSE:BMY) revealed a $14 billion acquisition deal.

Rocket Lab USA, Inc. (NASDAQ:RKLB) experienced a 23% climb in its shares after its subsidiary secured a substantial $515 million contract from the U.S. government for the production and operation of 18 space vehicles.

Contributor: Peter Nurse.