US equities advanced on Friday after New York Federal Reserve President John Williams suggested the central bank may have room to cut interest rates again in December.
The comments helped the stocks set onto a path to break a two-day slide driven by weakness in artificial intelligence stocks and renewed rate-policy uncertainty.
The Dow Jones Industrial Average rose 220 points, or 0.5%, while the S&P 500 gained 0.3%.
The Nasdaq Composite also edged higher.
The shift followed comments from Williams that signalled an openness to additional policy easing, prompting traders to reassess the likelihood of a third rate cut this year.
Expectations for a December reduction surged. Fed funds futures implied more than a 70% probability of a quarter-point cut, a sharp jump from the 39.1% likelihood priced in the previous day, according to the CME FedWatch tool.
The shift helped lift sentiment after a volatile stretch that had weighed heavily on high-growth, rate-sensitive sectors.
AI stocks, which had been set for another weak session before Williams spoke, pared losses in premarket trading.
Nvidia and AMD both turned positive as investors grew more confident that easier monetary policy could support a cooling US economy and help justify elevated valuations in the technology sector.
Rebound follows sharp reversal triggered by Nvidia rally fading
The recovery came after the market suffered a steep reversal on Thursday.
The Dow had climbed more than 700 points early in the previous session as investors reacted to Nvidia’s fiscal third-quarter earnings report, which delivered another strong set of results and initially fueled optimism around the broader AI theme.
But the bounce faded, and major indices ended sharply lower as concerns mounted that the Federal Reserve might leave rates unchanged in December.
Despite Friday’s rebound, stocks remained on track for sizable weekly losses.
The S&P 500 was still down 2.4% for the week, while the Dow had fallen nearly 2.6%.
The Nasdaq Composite had shed 3.3% amid pressure on major technology names.
Some investors viewed Thursday’s selloff not as the start of a broader downturn but as a routine pullback following strong market gains earlier in the year, particularly across megacap technology stocks that had powered the market’s advance.
Williams highlights labour market risks
Williams reiterated his view that the Federal Reserve has room to lower interest rates further.
In remarks delivered in Chile, he said risks to the labour market now outweigh risks to inflation, aligning himself with the more dovish members of the Federal Open Market Committee.
“I view monetary policy as being modestly restrictive, although somewhat less so than before our recent actions,” he said.
He added that he sees “room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral, thereby maintaining the balance between the achievement of our two goals.”
His comments provided the clearest signal yet that the Fed may remain open to additional cuts before year-end, offering markets a measure of support after a volatile week.
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