U.S. stocks moved sharply higher on Friday as expectations of a Federal Reserve rate cut in December helped offset concerns about high valuations in the tech sector.
A broad rally gained strength by late morning, lifting all three major U.S. indexes by more than 1.5%.
Treasury yields declined, the dollar held steady, and bitcoin eased earlier losses.
Despite Friday’s rebound, both U.S. and global equities remained on track to finish the week lower.
The Federal Reserve, which had limited access to fresh economic data during the government shutdown, finally received new labor market numbers on Thursday. The report showed an unexpected rise in the unemployment rate.
Following the data, markets increased their bets on a December rate cut. The CME FedWatch tool placed the odds at 73.3%, up sharply from 39.1% the previous day.
Messaging from Fed officials remained mixed. New York Fed President John Williams said a rate cut could still happen soon. In contrast, Dallas Fed President Lorie Logan argued the Fed should hold rates steady while assessing the impact of current policy.
“Williams’ comments appear to have shifted perceptions about the December cut,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. He noted that investors viewed Williams as leaning hawkish, making his remarks more influential.
Mayfield added that markets were also primed for a rebound after Thursday’s broad selloff.
Strong earnings from key artificial intelligence players, including Nvidia, briefly eased concerns about stretched AI valuations. These companies have driven much of the market’s gains in recent months.
Third-quarter earnings season is nearly complete. About 94% of S&P 500 companies have reported results, and 83% have beaten earnings expectations, according to LSEG data.
The Dow Jones Industrial Average climbed 723.78 points, or 1.58%, to 46,476.04.
The S&P 500 rose 105.55 points, or 1.61%, to 6,644.31.
The Nasdaq gained 383.16 points, or 1.75%, to close at 22,463.94.
In Europe, stocks finished lower for the week. Concerns about inflated tech valuations weighed on markets, and defense shares slipped after signs of progress toward ending the war in Ukraine.
MSCI’s global equity index rose 0.69% to 975.24.
The STOXX 600 fell 0.33%, while the FTSEurofirst 300 dropped 0.32%.
Emerging market stocks also declined. MSCI’s Asia-Pacific index outside Japan fell 2.67%, while Japan’s Nikkei dropped 2.40%.
The dollar was poised for a weekly gain but weakened against the yen after Japanese officials increased their warnings about the currency’s slide. The dollar index rose slightly to 100.19. The euro fell to $1.1512, while the dollar slipped 0.67% against the yen to 156.4.
Cryptocurrencies extended their decline. Bitcoin fell 2.98% to $84,620.04, and Ethereum dropped 3.9% to $2,766.09.
U.S. Treasury yields declined as expectations for a Fed rate cut increased.
The 10-year note yield fell to 4.069%, while the 30-year bond eased to 4.7189%.
The 2-year yield, which closely tracks Fed policy expectations, slipped to 3.518%.
Oil prices fell for a third straight session, hitting a one-month low as the U.S. pushed for progress in Russia-Ukraine peace talks.
U.S. crude dropped 1.59% to $58.06 per barrel. Brent closed at $62.56, down 1.29%.
Gold reversed earlier losses as Fed rate-cut expectations strengthened.
Spot gold rose to $4,088.09 an ounce, while U.S. gold futures gained 0.71% to $4,085.20.
