Friday’s trading session began in the red as the aftermath of Wednesday’s FOMC meeting continued to weigh on investor sentiment. However, the day wasn’t without its bright spots. Economic data and commentary from Federal Reserve officials provided some relief, sparking optimism in the markets.

The Personal Consumption Expenditures (PCE) data released on Friday came in lower than market expectations. Year-over-year Core PCE (excluding food and energy) stabilized at 2.8%, matching last month’s reading, while headline PCE dropped to 2.4%. Notably, during his press conference on Wednesday, Federal Reserve Chair Jerome Powell had forecasted Core PCE to land at 2.8%. The accuracy of this forecast likely boosted market confidence in the Fed’s predictive models, at least for now.

The markets responded positively in premarket trading, buoyed by the favorable economic data. However, the intraday rally gained momentum primarily due to remarks from Chicago Fed President Austan Goolsbee. Goolsbee expressed confidence that the recent firming in inflation data is temporary rather than indicative of a sustained trend. He stated his belief that inflation will return to the Fed’s target of 2% within the next 12–18 months.

Adding to the optimism, Goolsbee projected that the policy rate in 2025 would remain supportive of economic growth. His comments provided the market with much-needed encouragement, sparking hopes of a broader recovery.

Despite Friday’s rally, one day of gains does not constitute a trend. The technical landscape for the S&P 500 remains challenging, with scars from recent weeks still evident. To sustain the momentum and potentially spark a year-end "Santa Claus rally," consistent optimistic commentary from Fed officials over the coming weeks may be necessary.

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