U.S. stocks surged on Friday, with the S&P 500, Dow, and Nasdaq all rising, after a Federal Reserve official hinted at potential interest rate cuts. This boosted market sentiment, easing some concerns over AI stock valuations and cryptocurrency volatility, despite ongoing disagreements within the Fed regarding future rate decisions.
Wall Street experienced significant swings on Friday, but ultimately saw a strong rally, with the S&P 500 climbing 1.2%, the Dow Jones Industrial Average gaining 1.6%, and the Nasdaq composite up 1%. This rebound was largely fueled by comments from New York Federal Reserve Bank President John Williams, who indicated "room for a further adjustment" for interest rates, signaling a potential December rate cut. This prospect invigorated markets, which had previously run to records partly on expectations of such cuts. However, internal disagreements within the Fed, with some officials arguing against a December cut due to high inflation, continue to create uncertainty and market volatility. The market's Friday surge followed a dramatic reversal on Thursday, where U.S. stocks initially rose on Nvidia's earnings but then plummeted due to lingering worries about a potential artificial-intelligence bubble. Concerns persist about whether massive investments in AI chips and data centers will translate into substantial profits and productivity. AI-linked stocks, including Nvidia and Amazon, remained skittish on Friday, experiencing significant fluctuations. Bitcoin also saw a sharp plunge, briefly falling below $81,000 before recovering to $85,000, still significantly down from its peak last month. Despite the volatility in major tech and crypto assets, the vast majority of stocks on Wall Street rose, with over 90% of S&P 500 components climbing. Retailers like Gap and Ross Stores saw strong gains after reporting better-than-expected profits. Homebuilders also performed well, buoyed by hopes that lower interest rates could make mortgages more affordable. In the bond market, Treasury yields eased following Williams' speech and a University of Michigan report indicating improved consumer inflation expectations, further strengthening bets on a December rate cut, with traders now assigning a nearly 70% probability. Internationally, European markets were mixed, while Asian markets, including Japan's Nikkei 225 and South Korea's Kospi, tumbled.
