The Dow Jones Industrial Average recovered on Friday, following the announcement by New York Federal Reserve President John Williams indicated that the central bank may reduce interest rates once again this year.
Therefore, the blue-chip index increased 493.15 points, or 1.08 percent, to close at 46,245.41. The Nasdaq Composite gained 0.88 percent to settle at 22,273.08; meanwhile, the S&P 500 ended 0.98 percent higher at 6,602.99.
In remarks for a speech in Santiago, Chile, Williams said that “I view monetary policy as being modestly restrictive, although somewhat less so than before our recent actions. 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.”
The remarks of such a prominent Fed official as Williams were an indication to investors that the central bank leadership will reduce its overall benchmark overnight borrowing rate in their next meeting in December.
However, this prompted traders to bet even higher that the Fed would actually decrease interest rates in the next month, the third time in 2025.
The CME FedWatch tool reported that the Fed funds futures are now pricing a greater than 70 percent probability of a quarter percentage point cut, a significant jump from the less than 40 percent probability priced the day prior.
The market revived with stocks that were likely to gain the most in case of a decrease in rates, which was likely to stimulate consumer spending; these involved Home Depot, Starbucks, and McDonald’s.
Investors are hoping that easier monetary policy can revive a slow economy and can be used to justify historically high tech-stock prices.
In an interview with CNBC, Infrastructure Capital Advisors founder and CEO, Jay Hatfield, stated that “We think there definitely should be a cut. It’s going to depend on the next … employment report. It would have to be pretty weak, I think, to convince people to cut.”
Wall Street is entering a brutal market turnaround in the previous session. At one point on the Dow increased more than 700 points on Thursday, as investors rejoiced over a rejoiced Nvidia’s fiscal third-quarter earnings report.
The benchmark, the S&P 500 and Nasdaq Composite, were closed down abruptly with the Nvidia rally loss of momentum as concerns about the Fed staying on the sidelines increased in December.
The AI hype ended with a more than 3 percent decline. Despite the action on Friday, the three big averages recorded huge losses this week. The 30-stock Dow and the S&P 500 both dropped by approximately 2 percent this week to date. The Nasdaq shed 2.7 percent in the period.
In reference to the recent pressure, Hatfield feels that “this is a normal, seasonal, post-earnings valuation pullback,” adding that “the bubbles portion of the market [is] getting annihilated.”
That also covers bitcoin, which fell by over 2 percent on Friday, its week-to-date losses in the week amounting to almost 11 percent.
Cryptocurrency has been declining to levels that it has not experienced since April due to investors withdrawing from their risk-taking in the market.
Hatfield added about the biggest market, “The only real question is, ‘Where do we bottom out at?’’
