Wall Street Defies Global Trend with Late Session Recovery
In a surprising turnaround, Wall Street managed to shake off earlier losses on Friday, outperforming both Asian and European markets as equity investors went bargain hunting. This recovery came despite rising U.S. Treasury yields following hawkish comments from Federal Reserve officials that dampened hopes for a December interest rate cut.
The resilience shown by American markets stood in stark contrast to global counterparts. Blue-chip bourses from Tokyo to Paris closed lower, while safe-haven gold prices fell and the dollar index edged upward. London markets faced additional pressure due to fresh concerns about Britain's upcoming budget.
Federal Reserve Officials Signal Caution on Rate Cuts
A growing chorus of Fed policymakers has expressed reservations about further monetary easing, citing persistent inflation worries and relative stability in the labor market despite two rate cuts already implemented this year. Kansas City Federal Reserve President Jeffrey Schmid reinforced this stance, noting that his concerns about "too hot" inflation extend well beyond the narrow effects of tariffs alone.
Schmid's comments suggested he might dissent if the Fed considers another rate cut in December. Traders took these warnings seriously, with the probability of a quarter-point December Fed cut dropping significantly to 46% from 66.9% just a week ago, according to CME Group's FedWatch tool.
Tech Stocks Lead Wall Street Recovery
Despite opening lower, both the Nasdaq and S&P 500 clawed their way back to gains as investors set aside recent concerns about frothy valuations in speculative and heavyweight technology stocks. Andrew Slimmon, senior portfolio manager at Morgan Stanley Investment Management, explained this phenomenon: "People are conditioned to buy the dip. It has been a great strategy. And you're at a time in the year when the winners keep winning."
The technology sector demonstrated particular strength, with the S&P 600 technology index shaking off earlier losses to add more than 1%. AI chip leader Nvidia rose more than 2%, leading gains among the so-called Magnificent 7 stocks. Investors are now looking ahead to Nvidia's quarterly earnings and results from major retailers in the coming week, which could provide crucial insights into consumer health and the AI market's trajectory.
By market close, the Dow Jones Industrial Average had fallen 170.91 points (0.36%) to 47,286.31, while the S&P 500 rose 21.93 points (0.33%) to 6,759.42 and the Nasdaq Composite gained 120.10 points (0.53%) to reach 22,990.45.
Global Markets and Commodities React
The global picture remained concerning. MSCI's gauge of stocks across the globe was down 2.03 points (0.20%) to 998.13, though it pared earlier losses. The pan-European STOXX 600 index and Europe's broad FTSEurofirst 300 index both closed down approximately 1%. Asian markets had fared worse overnight, with MSCI's broadest gauge of Asian shares outside Japan falling 1.5%, Japan's Nikkei sliding 1.8%, and South Korea dropping 3.8%. Chinese shares declined 1.6% after data showed October industrial output and retail sales had slowed.
In bond markets, U.S. Treasury yields turned higher after an initial drop. The yield on benchmark U.S. 10-year notes rose 3.3 basis points to 4.144%, while the 30-year bond yield increased 4.4 basis points to 4.7458%. The 2-year note yield, which typically moves with Federal Reserve rate expectations, rose 1.9 basis points to 3.608%.
Currency markets saw the safe-haven Swiss franc give up earlier gains, while Britain's sterling weakened 0.19% to $1.3164 amid budget concerns. The dollar index rose 0.07% to 99.31.
Commodity markets showed mixed movements. Gold prices dropped almost 2% following the Fed officials' hawkish remarks, with spot gold falling 1.93% to $4,090.51 an ounce. Meanwhile, oil prices settled up more than $1 due to supply fears after the Black Sea port of Novorossiisk halted oil exports following a Ukrainian drone attack on an oil depot in the major Russian energy hub. U.S. crude settled up 2.39% at $60.09 a barrel, while Brent settled at $64.39 per barrel, up 2.19%.
In cryptocurrency markets, bitcoin fell 3.45% to $95,398.49, while ethereum rose 0.35% to $3,191.23.
