Wall Street's major indexes climbed on Friday as investors reconsidered the likelihood of a larger interest rate cut by the Federal Reserve next week. However, Adobe shares fell sharply after the company projected weaker-than-expected fourth-quarter earnings.

The probability of a 50-basis point rate cut surged overnight, rising to 43% from just 14% on Thursday, according to the CME's FedWatch Tool. Former New York Fed President Bill Dudley highlighted a strong case for a 50-basis point cut, with media reports calling the decision a "close call" adding to the uncertainty.

"A couple of articles in major financial outlets suggested that a 50-basis point cut remains a possibility, prompting markets to adjust their expectations," analysts at Deutsche Bank said.

The Russell 2000, known for its sensitivity to interest rates, outperformed with a 2.2% gain as lower-rate environments tend to benefit smaller-cap stocks. Michael James, managing director of equity trading at Wedbush Securities, noted that investors have been shifting back into U.S. equities ahead of the Fed's upcoming meeting.

Sector and Market Performance

All 11 sectors of the S&P 500 ended higher, led by a 1.2% rise in materials stocks, buoyed by an increase in precious metals prices. U.S. consumer sentiment also showed improvement in September as inflation eased, though concerns remain as the November election approaches.

The Dow Jones Industrial Average climbed 343.71 points, or 0.84%, to 41,440.48, while the S&P 500 rose 31.29 points, or 0.56%, to 5,627.15. The Nasdaq Composite gained 112.80 points, or 0.64%, reaching 17,682.47. The Philadelphia Semiconductor Index advanced 1.4%, boosted by broad gains in chip stocks.

Notable Movers

Boeing pared early losses, closing down 0.5% after workers at its West Coast factories walked off the job following a rejected contract offer. Meanwhile, Adobe slid 9.3% after its fourth-quarter earnings forecast fell short of analyst expectations. In contrast, Oracle saw a 2.7% jump after raising its fiscal 2026 revenue outlook.

Uber shares rose 4.9% following news of its plan to introduce autonomous ride-hailing in Austin and Atlanta, partnering with Alphabet's Waymo. However, Chinese e-commerce giant PDD Holdings fell 2.3% after the U.S. announced plans to tighten regulations on duty-free imports under the $800 "de minimis" threshold.

Advancing stocks outpaced decliners by a 6.71-to-1 margin on the NYSE, and by 3.62-to-1 on the Nasdaq. The S&P 500 recorded 50 new 52-week highs, while the Nasdaq posted 87 new highs and 36 lows.

As the Federal Reserve meeting draws closer, market participants will be closely watching the decision on interest rates and its impact on stocks.