U.S. stocks ended higher on Friday after a day of volatility, with the S&P 500 closing up 1%. The Dow Jones Industrial Average increased by 493 points, or 1.1%, while the Nasdaq composite rose by 0.9%. These gains came at the end of a week marked by significant swings in the market, leaving the S&P 500 just over four percent below its record high.
Investors faced uncertainty due to rapid changes in stock prices, which have been more pronounced since April’s sell-off. This comes after months of steady growth in the market. Two main questions remain unresolved: whether stocks like Nvidia and bitcoin are overvalued, and if the Federal Reserve will continue cutting interest rates.
Some reassurance came from John Williams, president of the Federal Reserve Bank of New York, who said at a conference in Chile that he sees “room for a further adjustment” to interest rates. This statement was interpreted as support for another rate cut in December. The Federal Reserve’s decisions are closely watched because expectations for lower rates have contributed to recent highs in stock prices.
However, other Fed officials have expressed concerns about reducing rates given ongoing inflation. The differing views within the Fed have contributed to sharp moves in financial markets.
On Thursday, stocks initially surged when Nvidia eased concerns about an artificial intelligence bubble but later dropped sharply following President Donald Trump’s announcement of new tariffs on “Liberation Day.” Despite Nvidia reporting strong profits from its AI chip business, there are lingering doubts about whether investments in AI technology will lead to long-term gains for companies like Amazon and Meta Platforms.
Nvidia’s shares fluctuated throughout Friday before ending down one percent. Amazon shares reversed early losses to close up 1.6%. Bitcoin also experienced volatility, dropping below $81,000 before recovering toward $85,000—well below last month’s peak near $125,000 and similar to levels seen during April’s market turmoil caused by Trump’s tariffs.
Despite these large movements among tech giants and cryptocurrencies, nearly ninety percent of S&P 500 stocks posted gains on Friday. Brian Jacobsen, chief economist at Annex Wealth Management said: “When the largest companies drive most of the losses, the market can look weaker than it really is.”
Retailers led some of Friday’s advances: Gap jumped more than eight percent after beating profit expectations across all its brands; CEO Richard Dickson cited strong sales trends at Old Navy, Gap and Banana Republic. Ross Stores rose over eight percent following positive quarterly results and an improved sales outlook from CEO Jim Conroy.
Homebuilder stocks also climbed amid hopes that potential rate cuts could lower mortgage costs—D.R. Horton rose nearly seven percent while Lennar and PulteGroup each gained more than five percent.
By day’s end, the S&P 500 closed at 6,602.99; Dow Jones finished at 46,245.41; Nasdaq ended at 22,273.08.
In bond markets, Treasury yields fell as traders increased their bets on a December rate cut—probability estimates rose from thirty-nine percent yesterday to nearly seventy-two percent today according to CME Group data (https://www.cmegroup.com/). This helped push ten-year Treasury yields down from 4.10% late Thursday to 4.06%.
Overseas markets showed mixed results: European indexes were uneven after steep declines across Asia that followed Wall Street’s sharp reversal Thursday.
“When the largest companies drive most of the losses, the market can look weaker than it really is,” said Brian Jacobsen, chief economist at Annex Wealth Management.
“Gap jumped 8.2% after reporting a stronger profit for the latest quarter than analysts expected,” CEO Richard Dickson said it saw strong sales trends at each of its Old Navy, Gap and Banana Republic brands.
“Ross Stores rallied 8.4% after it likewise delivered a better profit than expected,” CEO Jim Conroy said it saw broad-based growth during the quarter and raised the company’s forecast for an important measure of sales during the holiday season.
