Major United States equity benchmarks closed higher on Friday, trimming losses from a volatile week as expectations for a December Federal Reserve rate cut jumped following weaker-than-expected employment data and dovish comments from Federal Reserve officials.
The Dow Jones Industrial Average rose 493.15 points, or 1.08%, to finish at 46,245.41. The S&P 500 gained 64.2 points or 1% to close at 6,603.0, while the Nasdaq Composite advanced 195.0 points or 0.9% to 22,273.1.
Investor sentiment improved as rate-cut odds surged after the jobs report, though messaging from policymakers remained mixed overall. New York Fed President John Williams signalled that the central bank still has room to ease.
“I view monetary policy as being modestly restrictive, although somewhat less so than before our recent actions,” Williams said in remarks prepared for a speech in Santiago, Chile.
“Therefore, I still see room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral, thereby maintaining the balance between the achievement of our two goals.”
Dallas Fed President Lorie Logan, however, argued for keeping rates steady while the central bank evaluates the impact of existing policy settings.
Williams’ comments prompted traders to sharply increase bets that the Fed will cut rates for a third time this year at its December meeting.
According to the CME Group FedWatch Tool, markets are now pricing in a 73.3% probability of a cut, up from 39.1% a day earlier.
The recovery followed a dramatic reversal on Thursday. The Dow had jumped more than 700 points earlier in the session after Nvidia delivered a blockbuster fiscal third-quarter earnings report.
But the rally faded, and all three major benchmarks closed sharply lower as concerns grew that the Fed might hold rates steady in December. Nvidia ended the day down more than 3%.
Earnings have remained broadly strong. According to FactSet, with 95% of S&P 500 companies having reported third-quarter results, 83% have posted a positive earnings-per-share surprise and 76% have beaten revenue expectations.
Despite Friday’s gains, the major averages all suffered steep weekly losses. The S&P 500 and Dow each fell about 2% over the week, while the Nasdaq slid 2.7%.
Bitcoin also declined more than 2% on Friday, extending its week-to-date drop to nearly 11% and hitting its lowest level since April as risk appetite waned across markets.
On the bond markets, the 10-year and 2-year U.S. Treasury yields were down 0.5% and 0.9% to 4.067% and 3.505% respectively.
