The stock market made a comeback on Friday as investors welcomed fresh inflation data. The Dow Jones, S&P 500, and NASDAQ all rose by over 1.5%. This optimism followed a report showing a slowdown in price increases for November. The Federal Reserve’s preferred inflation gauge that core prices had eased more than expected, although they remain higher than the Fed’s 2% goal. Wall Street’s bounce capped a volatile week, giving traders hope after days of steep losses.

Earlier in the week, stocks struggled under the weight of a hawkish Federal Reserve. The central bank signaled fewer rate cuts in the coming years than previously anticipated, rattling investor sentiment. Still, the new inflation data offered a reprieve, helping markets end the week on a brighter note. Traders hope this data signals slower inflation ahead.

Shutdown Threat Casts Shadow Over Stock Market

Despite the gains, the looming U.S. government shutdown weighed heavily on market sentiment. Former President Trump called for the shutdown to “begin now,” adding to political tensions. Congress faces a tight deadline to pass a funding bill, and failure to act could disrupt the economy. Investors are wary of the potential impact, especially as the shutdown could affect government spending and consumer confidence during the holiday season.

Global markets also reacted to the shutdown threat. European stocks, already pressured by inflation concerns, fell sharply before paring losses late Friday. Political uncertainty in the U.S. is creating turbulence beyond its borders. Investors remain cautious as the budget impasse remains unresolved.

Stock Market Rallies but Faces Weekly Losses

The stock market’s late-week rally helped trim earlier losses but wasn’t enough to erase them entirely. For the week, the Dow Jones managed a modest gain of 1.9%, but the S&P 500 and NASDAQ posted losses of 1.6% and 1.2%, respectively. Investors spent much of the week grappling with the Federal Reserve’s policy shifts and Trump’s tariff threats on Europe.

However, Friday’s gains reflected renewed hope. Encouraging inflation data seemed to override fears of higher interest rates. Traders stepped back into the market after earlier sell-offs, with tech stocks and industrial names leading the recovery. The rally showcased investors’ resilience amid uncertain economic signals.

Shutdown and Inflation Add Complexity to Economic Outlook

While inflation relief buoyed the stock market, uncertainties remain. A potential government shutdown threatens to derail economic progress. Meanwhile, inflation, though easing, is still not at the Federal Reserve’s target. These mixed signals leave investors guessing about what’s next for monetary policy and the broader economy.

Trump’s comments on tariffs and the shutdown added fuel to an already volatile market. Global stocks felt the ripple effects, with European and Asian markets experiencing sharp declines during the week. The dual challenges of sticky inflation and political drama make it difficult for traders to stay optimistic.

Outlook Remains Clouded for the Stock Market

The stock market’s future hinges on several key factors. Inflation data has offered a glimmer of hope, but the Federal Reserve’s policy direction remains uncertain. Additionally, the looming government shutdown poses risks to both markets and economic growth. With global markets also facing their own challenges, from European tariffs to Asian monetary easing, investors are treading carefully.

Despite Friday’s rally, Wall Street faces a complex landscape. Political and economic headwinds could continue to shape trading activity in the weeks ahead. For now, the stock market remains a battleground for optimism and caution.