U.S. stocks continued their upward momentum in early Friday trading, with the Dow Jones Industrial Average rising nearly 200 points. New York Fed President John Williams hinted at the possibility of a December rate cut, boosting traders' bets on the Federal Reserve implementing its third rate reduction this year next month.
The Dow gained 196.05 points, or 0.43%, to 45,948.31, while the Nasdaq Composite added 35.23 points, or 0.16%, to 22,113.28. The S&P 500 rose 21.61 points, or 0.33%, to 6,560.37.
New York Fed President John Williams stated on Friday that he believes the central bank still has room to lower interest rates further. The influential policymaker, speaking at an event in Chile, suggested that risks to the U.S. labor market outweigh inflation concerns, aligning with the dovish stance of some Federal Open Market Committee members.
"Monetary policy is in a moderately restrictive place, though less restrictive than prior to our recent actions," Williams said. "I therefore continue to see room for further adjustment in the target range for the federal funds rate to move policy closer to a neutral setting that would maintain balance in achieving our dual mandate."
Williams' comments helped stocks temporarily shake off declines in AI-related shares and reinforced market expectations for another rate cut next month.
Meanwhile, Bitcoin fell about 6%, extending its weekly loss to over 13%. The cryptocurrency dropped to its lowest level since April as investors scaled back rate-cut expectations and grew concerned about valuations in the AI sector.
On Thursday, U.S. stocks opened higher but reversed gains, with the Dow initially rising more than 700 points following Nvidia's strong earnings report. However, tech stocks including Nvidia gave up their advances after September's nonfarm payrolls data raised doubts about additional Fed rate cuts this year. The three major indexes closed sharply lower, led by declines in AI stocks. Nvidia erased an early 5% gain to finish down over 3%, bringing its monthly loss to more than 10%.
"The equity market correction that's been underway since late October doesn't appear to have fully run its course yet," said Mark Luschini, chief investment strategist at Janney Montgomery.
"Conditions are somewhat oversold, setting up for at least one bounce, but economic data due this week could determine the extent of any rebound," Luschini added. "We may need a deeper pullback to attract buyers as this data could influence Fed rate-cut expectations."
Major U.S. indexes are on track for weekly losses as investors take profits in several high-valuation stocks. So far this week, the S&P 500 has declined 2.9%, the Dow has fallen nearly 3%, and the Nasdaq has dropped 3.6%.
Some investors view Thursday's market drop not as a sign of deeper declines but as a normal pullback following strong gains earlier this year.
"Markets were overheated in early October, but after three weeks of frustrating corrections, sentiment indicators are flashing extreme levels of fear and concern," said Ryan Detrick, chief market strategist at Carson Group. "From a contrarian perspective, this is a necessary process to shake out weak hands."