Wall Street stocks have rallied with expectations that the Federal Reserve will cut its main interest rate for the first time this year at its meeting this week. Such a move would give the economy a kickstart, and mortgage rates have already dropped in anticipation of it.

Expectations for a cut have built as recent reports suggested the US job market could settle into the precise balance that Wall Street has been betting on: slow enough to convince the Fed that it needs help, but not so weak that it will mean a recession, all while inflation doesn’t take off.

A lot is riding on whether that bet proves correct. Stocks have already soared on it. And if the Fed ends up cutting interest rates fewer times than traders expect, including three this year, the market could retreat in disappointment. That’s even if everything else goes right, and the economy does not fall into a recession and President Donald Trump’s tariffs don’t send inflation much higher.

Investors, “and I think the Fed, are convinced that we are not on the verge of a surge in inflation,” according to Scott Wren, senior global market strategist at Wells Fargo Investment Institute.

A survey from the University of Michigan on Friday suggested expectations for inflation may not be worsening among US consumers. Preliminary data suggested they’re bracing for inflation of 4.8 per cent in the upcoming year, the same as they were a month earlier.

Expectations for inflation over the longer term crept higher, though they’re still below where they were in April, when Trump announced his worldwide tariffs.

In the meantime, Wall Street continued to drift around its record heights.

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RH fell 4.6 per cent after the furniture retailer reported profit and revenue for the latest quarter that came up short of analysts’ expectations. It also trimmed its forecasted range for revenue this fiscal year amid what CEO Gary Friedman called “the polarising impact of tariff uncertainty and the worst housing market in almost 50 years.”

Oracle sank 5.1 per cent and was the single heaviest weight on the S&P 500 index. But that shaved only a bit off its surge from earlier in the week, when it soared to its best day since 1992 amid excitement about its winning multibillion dollar contracts related to artificial-intelligence technology.

Another company that’s benefited from the AI frenzy, Super Micro Computer, rose 2.4 per cent after saying it’s begun high-volume shipments of racks using Blackwell Ultra equipment from Nvidia that can be used for AI.

Microsoft climbed 1.8 per cent after European Union regulators accepted the tech giant’s proposed changes to its Teams platform, resolving a long-running antitrust investigation.

The European Commission said Friday that Microsoft’s final commitments to unbundle Teams from its Office software suite, including further tweaks following a market test in May and June, are enough to satisfy competition concerns.

With AP

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