NEW YORK (AP) — More swings are rocking Wall Street on Friday, except the U.S. stock market is jumping this time.
The S&P 500 took off and rallied 1.5%, flirting with its best day since May, after bobbing up and down through the morning. The Dow Jones Industrial Average was up 688 points, or 1.5%, as of 2:45 p.m. Eastern time, and the Nasdaq composite was 1.6% higher.
The abrupt turn could provide a fitting capstone for a week that has the S&P 500 just
3.7% below its record but also forced investors to stomach the sharpest hour-to-hour swings since a sell-off in April. The jarring moves are testing investors following a monthslong and remarkably smooth surge for stocks, and they come down to two basic questions, neither of which has been answered yet.
Have prices for Nvidia, bitcoin and other stars of Wall Street shot too high? And is the Federal Reserve done with its cuts to interest rates, which would boost the economy and prices for investments?
On the second question, financial markets found some assurance from a speech by the president of the Federal Reserve Bank of New York. Markets perked up immediately after John Williams told a conference in Chile that he sees “room for a further adjustment” for interest rates.
That could signal he’ll vote for another cut to rates in December. What the Fed does is critical for Wall Street because stock prices ran to records through last month in part because of expectations for a series of reductions.
Other Fed officials, though, have argued against a December cut given how high inflation remains. The uncertainty created by such sharp disagreement has triggered dramatic moves back and forth for markets.
The swings hit a crescendo on Thursday, when U.S. stocks initially surged after Nvidia seemed to tamp down worries about a potential bubble in artificial-intelligence technology. But the market quickly dropped to a sharp loss in its biggest one-day reversal since April, when President Donald Trump shocked markets with his “Liberation Day” tariffs.
Despite the strong profit report from Nvidia, whose chips are powering the move into AI, worries are still hanging around about the longer term. Will those AI chips that Amazon, Meta Platforms and other companies are gobbling up actually yield profits and productivity that are as big as proponents are envisioning? If not, some investors fear, all the investment won’t be worth it.
AI-linked stocks continued to swing on Friday, helping to drag the rest of the market behind them. Nvidia went from an initial gain to a drop of 4.3% and back to a rise of 0.6%, for example. Amazon swung from an early loss to a gain of 1.8%.
Bitcoin, meanwhile, briefly plunged below $81,000 before pulling back to $84,000. That’s down from nearly $125,000 last month and back to where it was in April, when markets were shaking because of Trump’s tariffs.
The vast majority of stocks on Wall Street rose despite such swings, with more than 90% of stocks in the S&P 500 climbing. Their movements often get drowned out by Nvidia and other Big Tech stocks, whose movements have much more effect on the S&P 500 because of their immense sizes.
“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.
Several retailers led the way. Gap jumped 9.2% 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 8.5% 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.
Homebuilders were also strong on hopes that lower interest rates could make mortgages cheaper and give a kick to the housing market. D.R. Horton jumped 7.3%, PulteGroup gained 5.9% and Lennar rose 6.7%.
In the bond market, Treasury yields eased on the hopes for cuts from the Fed. Traders are now betting on a nearly 70% probability of a December cut, up sharply from 39% a day before, according to data from CME Group. That helped send the yield on the 10-year Treasury to 4.06% from 4.10% late Thursday.
In stock markets abroad, indexes were mixed in Europe after markets tumbled in Asia following Wall Street’s stunning reversal.
Japan’s Nikkei 225 fell 2.4%, and South Korea’s Kospi dropped 3.8% for two of the larger losses.
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AP Writers Teresa Cerojano and Matt Ott contributed.
