Traders-Blog.com

Technology shares slumped and blue chips cut gains near the end of the session Friday, crimping an earlier rally sparked by bets that the Federal Reserve will cut interest rates at its next meeting.

The Dow Jones industrial average added 0.2 percent, with 30 minutes left in the session. The broader S&P 500 index gained 0.5 percent. The tech-fueled Nasdaq composite lost 0.5 percent.

Stocks rallied through the morning as investors welcomed falling oil prices and comments from Fed chief Ben Bernanke that suggested more rate cuts are on the way. The two developments helped ease worries that the turmoil in financial markets could send the economy into a recession.

But gains were limited in the afternoon by tech weakness, caused in part by disappointment about Dell’s quarterly results. By the last hour of the session, the tech weakness had cut into the rest of the market.

“A rate cut would be a shot in the arm to the markets and I think people are taking Bernanke’s speech as meaning that another rate cut is coming, but stocks have been choppy and are going to remain choppy, ” said Dean Barber, president at Barber Financial Group. Bernanke said Thursday night that the Fed remains concerned about the problems in the housing and credit markets and the threat posed to consumer spending and the economy. He said the Fed would remain “exceptionally alert and flexible” leading up to the next policy meeting on Dec. 11, all of which seemed to signal to Wall Street that the Fed will cut rates again.

Traders are currently betting that the central bank will cut rates by at least a quarter percentage point at the next meeting, with some banking on a half-point cut.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter