Wall St. advances as traders' bets rise for bigger Fed rate cut

STORY: Wall Street's main indexes closed higher on Friday as investors increased their bets on a bigger interest rate cut from the Federal Reserve at its policy meeting next week.

The Dow climbed almost three-quarters of a percent, the S&P 500 added roughly half a percent and the Nasdaq gained more than six-tenths of a percent.

Bets on the size of the Fed's rate cut have been volatile but were roughly split by late Friday between a 25-basis point cut and a larger 50-basis point cut.

Eric Lynch is Managing Director at Scharf Investments.

"It's reflective of what we've seen since the third quarter started, which is a lot of consternation from investors about where the economy's going, where inflation is going to land, and what the Fed can do in terms of rate cutting. And so stocks, the VIX (Chicago Board Options Exchange's CBOE Volatility Index) and now the CME FedWatch tool's jumping all over the place. In the wake of the CPI report on Wednesday, because core inflation was accelerating month over month and still relatively high year-over-year, very sticky, that probability of a 50 points cut was 15%, now it's above 50. I think it's just really indicating that investors really don't know which way the Fed's going to go and which way the economy is going to go."

Stocks on the move included Adobe, which finished down 8.5% after the Photoshop maker forecast fourth-quarter earnings below estimates.

Boeing shares sank more than 3.5% after its U.S. West Coast factory workers walked off the job on Friday as they overwhelmingly rejected a contract deal.

And Uber shares rallied about 6.5% after the ride-hailing platform said it would bring autonomous ride hailing to Austin, Texas, and Atlanta in partnership with Alphabet's Waymo.