NEW YORK — More swings hit Wall Street on Friday, except the U.S. stock market finished higher this time.
After bobbing up and down through the morning, the S&P 500 took off and rallied nearly 2 per cent before finishing with a gain of 1 per cent. The Dow Jones Industrial Average climbed 493 points, or 1.1 per cent, and the Nasdaq composite rose 0.9 per cent.
It was a fitting finish for a week that left the S&P 500 just 4.2 per cent 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” to 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 all those AI chips that Amazon, Meta Platforms and other companies are gobbling up actually yield profits and productivity 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 per cent and then swung back and forth before finishing with a loss of 1 per cent, for example. Amazon went from an early loss to a gain of 1.6 per cent.
Bitcoin, meanwhile, briefly plunged below $81,000 before pulling back toward $85,000. That’s down from nearly $125,000 last month and brought it 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 nearly 90 per cent 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 8.2 per cent 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 per cent 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 6.8 per cent, Lennar rose 5.9 per cent and PulteGroup gained 5.2 per cent.
All told, the S&P 500 rose 64.23 points to 6,602.99. The Dow Jones Industrial Average gained 493.15 to 46,245.41, and the Nasdaq composite climbed 195.03 to 22,273.08.
In the bond market, Treasury yields eased on hopes for cuts from the Fed. Traders are now betting on a nearly 72 per cent probability of a December cut, up sharply from 39 per cent a day before, according to data from CME Group. That helped send the yield on the 10-year Treasury to 4.06 per cent from 4.10 per cent late Thursday.
In stock markets abroad, indexes were mixed in Europe after tumbling in Asia following Wall Street’s stunning reversal on Thursday.
Japan’s Nikkei 225 fell 2.4 per cent, and South Korea’s Kospi dropped 3.8 per cent for two of the larger losses.
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AP Writers Teresa Cerojano and Matt Ott contributed.