Wall Street Gains Amid Fed Interest Rate Speculation

Wall Street's primary indexes closed higher as investors focused on a possible larger interest rate cut by the Federal Reserve. Bets on the cut were mixed, but small cap stocks performed strongly. The market sentiment was buoyed by former New York Fed President Bill Dudley's comments advocating for a larger cut.

Wall Street's primary indexes closed higher on Friday as investors zoomed in on the potential for a more substantial interest rate cut by the Federal Reserve next week. Rate-sensitive small cap stocks outperformed amid this speculation.

Bets on the cut size have been volatile, with expectations for a 50 basis point cut jumping to 49% from 28% on Thursday, according to CME's FedWatch Tool. Former New York Fed President Bill Dudley noted there was a strong case for a 50-bps cut.

Meanwhile, the Russell 2000 small cap index showed significant gains, highlighting optimism that a 50 basis point cut might not signal a looming recession. The S&P 500 gained 30.05 points to 5,625.81, while the Nasdaq Composite and Dow Jones Industrial Average also saw substantial increases.

(With inputs from agencies.)