US stocks bounce higher on rate cut optimism and Trump policies

US and global equity markets could continue to find support in advancements in AI and support the growth of the tech sector this year, analysts say

Pedestrians outside the New York Stock Exchange in New York. The Dow Jones Industrial Average closed 0.8 per cent higher on Friday. Bloomberg

US stocks rose on Friday on expectations of additional rate cuts by Federal Reserve and pro-business policies by the incoming Donald Trump administration to support the growth of the economy.

The Dow Jones Industrial Average closed 0.8 per cent higher at 42,732.13, while the S&P 500 jumped 1.3 per cent to 5,942.47. The Nasdaq Composite rose 1.8 per cent to 19,621.68.

The Federal Reserve began lowering interest rates last year after keeping the rates at a 22-year high for more than a year amid easing of inflationary pressures. Last month, it cut US interest rates by 25 basis points to stimulate the economy.

Mr Trump’s proposals, which include cutting corporate taxes, easing regulations and imposing tariffs, are also expected to energise the US economy and support corporate earnings. Mr Trump is set to take oath as the US President, for the second time later this month.

"Despite a challenging start, with declines in key indices such as the Dow Jones, S&P 500, and Nasdaq, there is optimism for growth in 2025,” George Pavel, general manager at brokerage firm Naga.Com Middle East, said.

“The outlook is supported by a strong economy and an expected favourable business environment under Trump’s administration," Mr Pavel said. "The technology sector is expected to drive growth, although concerns over sticky inflation, geopolitical tensions, and policy uncertainty could pose risks and limit upside potential.”

On the economic front, the Institute for Supply Management's (ISM) purchasing managers' index (PMI) surprised to the upside by gaining 0.9 point to 49.3, its highest reading since March, nudging ever closer to expansion territory, Reuters reported.

Advancements in AI, which are contributing to the growth of the tech sector and the creation of new opportunities across other sectors and industries could also drive US and global equity markets this year, Mr Pavel added.

In Europe, London's FTSE 100 closed 0.4 per cent lower, while Paris' CAC 40 lost 1.5 per cent. Frankfurt's DAX was down 0.6 per cent when markets closed on Friday on concerns related to economic slowdown in Europe.

In Asia, Hong Kong’s Hang Seng index edged 0.7 per cent higher and Shanghai’s composite was down 1.6 per cent, with Japan’s Nikkei closed.

"The US economy continues to show resilience, particularly in its labour market and consumer spending, " Dilin Wu, research strategist at Pepperstone, said. "In contrast, signs of economic slowdown in Europe are becoming increasingly evident, while the effectiveness of China’s economic stimulus measures remains to be seen."

Meanwhile, oil prices rose on Friday, closing the week higher on the back of cold weather in Europe and the US as well as additional economic stimulus measures by China including a move to raise wages for government workers.

Brent, the benchmark for two thirds of the world’s oil, was up 0.8 per cent to $76.51 a barrel, while West Texas Intermediate, the gauge that tracks US crude, rose 1.1 per cent, to $73.96 per barrel.

US crude stockpiles also dropped by 1.2 million barrels to 415.6 million barrels last week to support oil prices, EIA data showed.