Wall Street kept its rebound rolling this week, though with slightly less gusto than the previous period, as investors leaned into expectations that the Federal Reserve will deliver another rate cut in December.

The market has essentially priced in a 25-basis-point cut for the Fed's December 10 meeting, with odds hovering near 90%. If it happens, it'll be the third straight reduction, cementing the central bank's pivot away from its aggressive tightening campaign.

Jobs Data Gets Confusing

The economic data this week was a choose-your-own-adventure story. ADP reported that private employers actually cut 32,000 jobs in November, and Challenger, Grey & Christmas tallied 71,321 announced layoffs for the month. Not exactly the stuff of robust labor markets.

But here's where it gets interesting: initial jobless claims collapsed in the last week of November, dropping 27,000 to just 191,000, according to the Labor Department. Sure, holiday weeks tend to produce weird numbers, but this marked the fourth consecutive decline. Claims came in way below the 220,000 estimate and hit their lowest point since September 2022. So which is it? Weakening or strong? Welcome to 2025's economic data whiplash.

Inflation Takes a Breather, Consumers Feel Slightly Less Awful

On the inflation front, there's cautiously good news. The Fed's preferred measure, the core Personal Consumption Expenditures price index for September—released weeks late thanks to the government shutdown—slowed from 2.9% to 2.8% year over year. It's the first deceleration in four months, and exactly the kind of signal the Fed wants to see before cutting rates again.

Consumer sentiment also showed signs of life. The University of Michigan's headline sentiment index jumped from 51 to 55, the highest reading since August. Joanne Hsu, director of the Surveys of Consumers, noted the modest improvement was "concentrated primarily among younger consumers" and fueled by a 13% increase in expected personal finances.

But don't break out the champagne just yet. While inflation expectations cooled slightly from November, consumers still expect prices to keep climbing well above the Fed's 2% target. "The overall tenor of views is broadly somber, as consumers continue to cite the burden of high prices," Hsu said.

Winners and Losers

On Wall Street, Microchip Technology Inc. (MCHP) was the S&P 500's star performer this week, surging 24% following upward earnings revisions. On the flip side, Paramount Skydance Corp. (PSKY) was the week's biggest casualty, plummeting 14%—including a 7% drop Friday—after Netflix Inc. (NFLX) announced that Warner Bros. Discovery (WBD) had accepted its acquisition offer, pending regulatory approval.

Looking Ahead: More Cuts on the Horizon?

Investors are already looking past December, anticipating at least two more rate cuts in 2026. Part of that optimism stems from an expected leadership change at the Fed. Chair Jerome Powell's term wraps up in May, and Kevin Hassett—the current National Economic Council director—is widely viewed as the frontrunner to replace him. Markets see Hassett as notably more dovish than Powell, someone who prioritizes labor market strength over inflation concerns. If that plays out, the rate-cutting cycle might have more room to run than the Fed's current projections suggest.