Fed Rate Hike Looms as U.S. Stocks Rebound from Four-Day Losing Streak

U.S. stocks ended their four-day losing streak on Friday, but investors remain cautious ahead of next week's Federal Reserve meeting.

The Dow Jones Industrial Average rose by 509.19 points (0.98%) to close at 52,573.29, while the S&P 500 added 0.96% to finish at 26,333.04 and the Nasdaq increased by 0.86% to 7,656.98.

The rebound followed four consecutive days of losses across all three major indexes, marking the Dow's longest losing streak since late April. However, for the week, the Dow fell 1.6%, the S&P 500 slid 0.8%, and the Nasdaq dropped about 0.7% in its first down week in three.

Markets are heading into next week's Fed meeting on edge, with policymakers widely expected to raise interest rates in a move that could test a rally already strained by climbing bond yields.

Fed funds futures imply more than an 80% probability of a quarter-point rate hike from the current 3.5%-3.75% range, according to LSEG data.

JPMorgan economists noted that 'a shallow hiking cycle should be manageable for equities,' but warned that if inflation reaccelerates and the forward curve starts to price in a broader hiking cycle, equities will likely face more significant downside.