U.S. Stocks Surge, Gold Hits Records on Fed Rate Cut Speculation

U.S. stocks and gold surged on Friday as speculation grew the Federal Reserve would implement significant rate cuts in its upcoming policy meeting. The likelihood of a half-point rate cut increased, boosting investor confidence. Major U.S. indices closed higher, while the dollar and Treasury yields dipped.

U.S. stocks and gold surged on Friday amid increasing speculation that the Federal Reserve might implement significant rate cuts in its upcoming policy meeting. Investor confidence soared with futures tied to the Fed's policy rate now reflecting about a 47% chance of a half-point rate cut, up from 28% earlier this week.

The anticipation of more substantial rate reductions lifted stocks, gold, and Treasury prices, while driving down the dollar. All three major U.S. indexes closed higher; the Dow Jones Industrial Average rose 0.72%, the S&P 500 gained 0.54%, and the Nasdaq Composite climbed 0.65%. Globally, MSCI's gauge of stocks increased by 0.61%.

Former New York Fed President Bill Dudley reinforced hopes for a heftier cut, stating there's a strong case for a 50 basis point reduction. However, with recent tepid inflation data, the Fed may opt for a smaller initial cut. In Asia, stock indexes in mainland China and Japan dropped, while the dollar and Treasury yields continued to dip amid the growing consensus for Fed rate cuts.

(With inputs from agencies.)