U.S. stocks pushed higher on Friday, with the major indexes hovering just shy of all‑time highs as fresh inflation data reinforced expectations that the Federal Reserve will cut interest rates at its meeting next week.
As of late morning in New York (around 10:40 a.m. ET), the S&P 500 was up roughly 0.5%, the Dow Jones Industrial Average gained about 0.5% (around 238 points), and the Nasdaq Composite rose about 0.6%, leaving Wall Street within touching distance of record levels set in late October. [1]
Figures are based on intraday data and may shift by the closing bell.
Key takeaways for December 5, 2025
- Major U.S. indexes traded near record highs as investors reacted to the Fed’s preferred inflation gauge and looked ahead to the December 9–10 FOMC meeting. [2]
- The Fed’s preferred inflation gauge (PCE) rose 2.8% year‑on‑year in September, with core PCE also at 2.8%, keeping inflation above target but broadly in line with expectations. [3]
- Markets now price roughly 80–90% odds of a quarter‑point rate cut next week, even as Fed officials remain unusually split on the decision. [4]
- Consumer sentiment improved but remains gloomy, with the University of Michigan index ticking up to 53.3 and one‑year inflation expectations easing to 4.1%. [5]
- Big movers: Ulta Beauty and Victoria’s Secret surged on strong results and guidance, while Hewlett Packard Enterprise edged lower on softer revenue. [6]
- Headline deal: Netflix agreed to buy Warner Bros Discovery’s studios and streaming unit for $72 billion, sending Warner Bros Discovery higher, while Netflix and Paramount Skydance slipped on deal and bidding‑war jitters. [7]
Markets at a glance: Wall Street drifts toward record territory
Friday’s session continued this week’s theme: quiet but upward‑tilting trading as investors digest a dense run of macro data but avoid big directional bets ahead of the Fed.
- S&P 500: Up about 0.5%, “on track” to potentially surpass its late‑October record close if gains hold into the afternoon. [8]
- Dow Jones Industrial Average: Up roughly 0.5% (about 238 points), also flirting with record territory. [9]
- Nasdaq Composite: Higher by around 0.6%, supported by large‑cap tech but facing fresh scrutiny over AI‑driven valuations. [10]
Exchange‑traded fund proxies tell a similar story: the Dow‑tracking DIA was up around 0.4%, while the Nasdaq‑100 tracker QQQ gained close to 0.8% as of late morning, underscoring broad but measured risk‑on sentiment.
Volatility has faded noticeably compared with earlier in the autumn. AP reporting notes that U.S. stocks have been “much quieter” this week after several periods of “sharp and scary swings,” suggesting investors are settling into a wait‑and‑see mode heading into year‑end. [11]
Why stocks are up today: PCE inflation and the Fed’s December dilemma
Fed’s preferred inflation gauge: firm but not frightening
The macro headline of the day was the long‑delayed personal consumption expenditures (PCE) price index for September, the Fed’s preferred inflation gauge. Because of the extended government shutdown, the report arrived five weeks late – but in time for next week’s FOMC meeting. [12]
Key takeaways from the PCE report:
- Headline PCE:
- +0.3% month‑on‑month (unchanged from August)
- +2.8% year‑on‑year, slightly above the Fed’s 2% target but broadly consistent with prior readings [13]
- Core PCE (ex‑food & energy):
- +0.2% month‑on‑month
- +2.8% year‑on‑year, indicating underlying inflation is firm but not accelerating [14]
In other words: inflation “didn’t get any worse”, to borrow MarketWatch’s phrasing, and stayed just under 3% on the Fed’s preferred gauge. [15]
That combination – still‑too‑high inflation, but not spiraling – reinforces the case for a modest rate cut aimed at supporting a softening labor market without signaling a full‑blown easing cycle.
Consumer sentiment and tariffs: a cautious Main Street
On the demand side, the University of Michigan’s preliminary December consumer sentiment index rose to 53.3 from 51 in November, beating economists’ expectations but sitting well below the 71.7 reading from January. [16]
- Consumers’ current‑conditions views slipped slightly.
- Expectations for the future improved modestly.
- Crucially, year‑ahead inflation expectations eased to 4.1% from 4.5%, the lowest since January – a welcome sign for the Fed given how powerful expectations can be in shaping actual price trends. [17]
At the same time, AP notes that sentiment is still “broadly somber,” with many households feeling the pinch from higher prices and elevated tariff levels after a series of trade measures this year. [18]
The Fed’s December meeting: split committee, united markets
Rate‑cut odds near 80–90%
Markets are treating next week’s Fed meeting as the last big macro event of 2025 – and they’re increasingly confident it will deliver a cut:
- Derivatives and futures pricing imply roughly an 80%+ chance of a 25‑basis‑point cut at the December 9–10 FOMC meeting, according to analyses from Plus500 and other rate watchers. [19]
- The Federal Home Loan Bank of New York notes that as of Thursday afternoon, the market is pricing end‑2025 Fed funds at about 3.66%, which implies roughly a 91% probability of another 25‑bp cut at the upcoming meeting compared with just two weeks ago. [20]
- A Reuters “Week Ahead” piece pegs the odds at about 85% for a December cut, underlining just how consensus the market view has become. [21]
But inside the Fed, unity is scarce
The market might be confident – the Fed is not.
- At least five of the 12 voting FOMC members have publicly voiced opposition or skepticism about another cut this year.
- Meanwhile, three members of the Board of Governors in Washington favor a cut, creating one of the most divided policy debates in years. [22]
Reuters points out that the Fed has not seen three or more dissenting votes at a single meeting since 2019 – and it has happened only nine times since 1990. [23]
The data backdrop is muddy:
- ADP private payrolls data showed a net job loss of 32,000 in November, with small businesses leading the declines, especially in manufacturing, professional services, information, and construction. [24]
- Challenger job‑cut data revealed a 23.5% year‑over‑year rise in layoffs, suggesting companies are trimming staff more aggressively. [25]
- Yet initial jobless claims fell to 191,000, the lowest in more than three years, and continuing claims eased from elevated levels – signaling that laid‑off workers can still find jobs reasonably quickly. [26]
Add in a 43‑day government shutdown that has delayed key employment and inflation prints, and the Fed is heading into the meeting with a thinner‑than‑usual data set. [27]
That’s why investors are laser‑focused not just on whether the Fed cuts, but also on:
- How many officials dissent, and
- What Chair Jerome Powell signals about the 2026 path for rates – the timeline markets increasingly care about. [28]
Sector and stock highlights: retailers rally, tech digests mega‑deal
Retail and consumer: Ulta and Victoria’s Secret light up the tape
Retail and consumer stocks helped drive Friday’s advance:
- Ulta Beauty jumped about 11% after reporting stronger‑than‑expected profit and revenue, highlighting resilience in beauty spending even as customers feel broader financial pressure. The company also raised its full‑year revenue forecast, citing strong e‑commerce growth. [29]
- Victoria’s Secret surged roughly 20% after posting a narrower‑than‑expected loss and boosting its full‑year sales outlook – a rare bright spot for a brand that has struggled to adapt in recent years. [30]
These moves align with the broader narrative from the PCE report: consumer spending is still rising, but at a slower pace, with September outlays up 0.3% after a 0.5% gain in August. [31]
Tech & media: Netflix–Warner Bros megadeal reshapes Hollywood
The biggest corporate story of the day is in entertainment and streaming:
- Netflix agreed to buy Warner Bros Discovery’s TV, film studios and streaming division for $72 billion, valuing WBD at $27.75 per share in a cash‑and‑stock deal. [32]
- The acquisition would hand Netflix control of HBO, HBO Max, and iconic franchises like “Game of Thrones,” “Harry Potter,” and DC’s superhero universe, instantly transforming the streamer into one of the most powerful traditional studios in Hollywood. [33]
- On Friday’s news:
- Warner Bros Discovery shares rose about 3%, though they still traded below the offer price, reflecting regulatory uncertainty.
- Netflix dipped roughly 0.2%, as investors weighed potential synergies against integration risk and antitrust scrutiny.
- Paramount Skydance, previously viewed as the front‑runner to acquire WBD, sank about 6%. [34]
Regulators in both the U.S. and Europe are expected to scrutinize the deal closely. Analysts warn that combining the world’s largest streaming service with HBO Max could concentrate too much power in a single player, raise questions about content access and pricing, and draw intense scrutiny from lawmakers and industry groups. [35]
Tech hardware: Hewlett Packard Enterprise slips on softer revenue
Not all corporate news was bullish. Hewlett Packard Enterprise slipped about 0.6% after reporting weaker‑than‑expected revenue, though profit topped forecasts. That combination – solid margins but tepid top‑line growth – left investors cautious about enterprise IT spending heading into 2026. [36]
Global backdrop: calm bonds, surging copper, softer dollar
Friday’s U.S. moves unfolded against a broadly constructive global backdrop:
- Global shares rose and were on pace for a second straight week of gains, as traders positioned ahead of the U.S. inflation report and Fed meeting. [37]
- Copper futures hit a record high around $11,705 per metric ton, after Citi upgraded its price outlook on supply constraints and expectations for easier Fed policy. [38]
- In bond markets, U.S. Treasury yields were little changed, with the 10‑year hovering near 4.11% and the 2‑year around 3.54%, reflecting a steady outlook for policy rates beyond the December cut. [39]
- The U.S. dollar softened slightly, while the Japanese yen strengthened amid expectations that the Bank of Japan will soon hike rates, complicating popular “carry trades” that have funded purchases of U.S. tech and crypto assets. [40]
Overseas equity markets largely followed Wall Street’s lead, with Germany’s DAX up about 0.9% and South Korea’s Kospi up 1.8%, while Japan’s Nikkei slid 1.1% on weak household‑spending data and speculation about BOJ tightening. [41]
December outlook: Santa rally… or AI hangover?
Will the traditional “Santa rally” appear?
With the typically volatile autumn now behind investors, attention is turning to the traditional “Santa rally” – the tendency for stocks to finish the year on a positive note.
Analysis from The National highlights that:
- December has historically been one of the strongest months for the S&P 500, with the index rising roughly three‑quarters of the time.
- However, this year’s rally comes against a backdrop of AI‑driven exuberance, elevated valuations, and lingering inflation, leading some strategists – including prominent bank CEOs – to warn that a sharp correction of up to 30% remains possible over the next couple of years. [42]
At the same time, market breadth is improving:
- Gains are spreading beyond the “Magnificent Seven” mega‑cap tech names, with health care and consumer sectors driving much of the earnings growth in the broader “S&P 493.” [43]
- Some strategists argue this broadening is a healthier sign than earlier narrow rallies driven almost entirely by AI leaders.
What strategists are watching
Across Wall Street, commentary converges on a few core themes:
- Fed guidance matters more than the December move.
Many portfolio managers say a quarter‑point cut is largely “baked in”; what will drive markets into 2026 is Powell’s tone on future cuts and the balance of dissent inside the committee. [44] - “Stable growth, softening labor, constrained pricing power”
As one major private bank put it, the current mix of moderate growth, cooling labor conditions and limited pricing power is ideal for a gradual easing of policy – but a shock from tariffs, geopolitics or AI‑linked volatility could upset that balance. [45] - Macro fog from the government shutdown.
With October’s employment report never released and November’s delayed until after the Fed meets, policymakers and investors are relying on second‑tier indicators like ADP, jobless claims and surveys – a recipe for higher uncertainty and sudden repricing if the eventual hard data look very different. [46]
What this means for investors
For traders and long‑term investors alike, today’s action paints a picture of a market priced for a gentle landing:
- Equities near record highs signal confidence that the Fed can trim rates without reigniting inflation. [47]
- Rate‑sensitive sectors – growth tech, communication services, and consumer discretionary – continue to lead on positive macro surprises, while defensives are lagging but stabilizing. [48]
- Cross‑asset signals (steady yields, strong copper, softer dollar) point to broad risk appetite rather than a narrow equity‑only mania. [49]
At the same time, the wall of worry remains high:
- The Fed could still surprise with a “hawkish cut” or even no cut at all, especially if internal dissent is strong. [50]
- AI‑related valuations and mega‑cap concentration leave parts of the market vulnerable if growth expectations disappoint. [51]
- Tariffs, politics and data gaps from the shutdown add a layer of policy risk that’s hard to model.
For now, though, “stock market today” on December 5, 2025, looks like this: Wall Street is drifting higher, volatility is low, and investors are betting that a cautious Fed will gently guide the economy – and markets – into the new year.
This article is for informational purposes only and does not constitute financial advice. Always do your own research or consult a licensed professional before making investment decisions.
References
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