NEW YORK — U.S. stocks are rallying Friday to more than halve their losses in what had been one of their worst weeks of the year.

The S&P 500 jumped 1.7% and was on track for its best day in six weeks. The Dow Jones Industrial Average was up 741 points, or 1.8%, as of 1:05 p.m. Eastern time, and the Nasdaq composite gained 1.7%.

Eli Lilly Leads Market Surge

Eli Lilly was one of the strongest forces lifting the market after a rival, Novo Nordisk, gave an update on a potential weight-loss treatment that analysts said fell short of expectations. That could benefit Eli Lilly, whose Zepbound helps treat obesity, and its stock climbed 3.3%.

The biggest push upward came from superstar stock Nvidia, which rose with the broad market after a report said a measure of inflation the Federal Reserve likes to use was slightly lower last month than economists expected. It’s an encouraging signal following recent reports suggesting inflation may be tough to get all the way down to the Fed’s 2% goal from its peak above 9%.

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Fed’s Rate Cut Expectations Shift

The threat of higher inflation was one of the reasons Fed Chair Jerome Powell gave this week when the central bank hinted it may deliver fewer cuts to interest rates next year than it earlier expected.

That warning sent a shock through the stock market, which had run to all-time highs on the widespread assumption that the Fed would deliver a string of cuts to rates in 2025. Now traders are largely betting on one, two or perhaps even zero, according to data from CME Group.

“When optimism is rising and market multiples are expanding, it just takes a little fear to take the veneer off a market rally,” according to Brian Jacobsen, chief economist at Annex Wealth Management.

Friday’s better-than-expected inflation data pushed traders to trim their bets for zero cuts in 2025, which they now collectively see a 15% chance of.

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Political Uncertainty Looms

Critics had been warning stock prices were vulnerable to drops after running so high, and they likely needed everything to go correctly to justify their stellar gains for the year so far. Besides the diminished hopes for several rate cuts next year, Wall Street got another reminder late Thursday that everything may not go as expected.

The House of Representatives resoundingly rejected President-elect Donald Trump’s plan to keep the U.S. government fully running ahead of a potential shutdown. It’s unclear what the next steps will be, but the failure indicates Washington may not run smoothly even with Republicans in charge of the House, Senate and White House.

The U.S. stock market has lost a chunk of its gain since Trump’s win on Election Day raised hopes for faster economic growth and more lax regulations on companies, which would boost corporate profits. Worries have risen that Trump’s preference for tariffs and other policies could lead to higher inflation, a bigger U.S. government debt and difficulties for global trade.

“Next year will be a time of huge challenges to the world economy,” High Frequency Economics’ Carl B. Weinberg wrote in a note to clients, citing U.S. political uncertainty, expected global trade wars and geopolitical uncertainty. “We do not look forward to these changes.”

Mixed Results for Individual Stocks

On the losing end of Wall Street was U.S. Steel, which sank 3.9% after saying its fourth-quarter results will likely come in below its earlier forecast. CEO David Burritt said steel prices remain depressed.

Novo Nordisk’s stock that trades in the United States lost nearly a fifth of its value, 18.5%, after the update on CagriSema, its potential treatment for adults with obesity.

Nike’s stock slipped 0.2% despite reporting a better profit for the latest quarter than analysts expected.

Analysts said changes by Nike’s new CEO, Elliott Hill, to turn around the company will likely cut into financial results in the near term to drive better long-term growth. The company is likely to cut prices to clear its warehouses of old products, for example, and open space for a new wave of innovation.

They were the exceptions. Nearly every stock in the S&P 500 was rising, at 98%. Among them were cruise lines after Carnival steamed past analysts’ expectations for profit in the latest quarter.

CEO Josh Weinstein said it’s seeing strong demand and expects growth to continue into 2025 thanks in part to higher fares. Carnival climbed 5.8%. Rivals Norwegian Cruise Line and Royal Caribbean both rose at least 4%.

In the bond market, Treasury yields eased.

The yield on the 10-year Treasury sank to 4.51% from 4.57% late Thursday.

In stock markets abroad, indexes fell modestly across much of Asia and Europe.