After opening lower the S&P 500 pared most of its losses with the help of bargain hunters after blue-chip markets from Tokyo to Paris closed sharply lower while renewed worries about Britain’s upcoming budget added to pain in UK markets.
A growing number of Fed policymakers have signaled patience on further easing, citing inflation concerns after two US rate cuts this year and signs of relative stability in the labor market.
On Friday morning, Kansas City Federal Reserve President Jeffrey Schmidt pointed to concerns that “too hot” inflation outweighs the narrowing effects of tariffs alone, suggesting potential dissent in December if policymakers choose to cut rates.
At noon, Dallas Federal Reserve President Lori Logan ruled out a December rate cut as she opposed the Fed’s October cut on concerns that inflation was already too high.
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After 43 days without official data due to a record-long US government shutdown, traders reacted to the central bankers’ comments by pricing in a roughly 46% chance of a quarter-point cut next month, down from 66.9% last week, according to CME Group’s FedWatch tool.
Still, the technology-focused Nasdaq closed slightly higher as investors put aside some of their fears about high valuations in technology stocks.
“The rest of the world was weak as they followed the lead of the US market on Thursday,” said Andrew Slimman, senior portfolio manager at Morgan Stanley Investment Management, but noted that Wall Street was supported by “bids in stocks that led to declines over the past few days.”
“People are conditioned to buy the dip. It’s been a great strategy. And you’re at a time in the year when winners keep winning. That’s why the stocks that are performing today have turned winners from the lows in April,” he said.
For example, AI chip leader Nvidia gained as much as 1.8% while the small-cap S&P 600 technology index ended up 0.3%, shaking off earlier losses.
Perhaps adding to the awkwardness was next week’s packed schedule, including Nvidia’s quarterly earnings.
and large retailers, which will highlight consumer health and AI demand.
“There are so many cross currents in the market that it can be difficult to determine which direction things are headed. Is the US economy strong or weak? The answer is, both. Is inflation high or low? Are valuations high or low?” said Victor Shvets, head of global desk strategy at Macquarie Capital.
On Wall Street, the Dow Jones industrial average fell 309.74 points, or 0.65%, to 47,147.48, but was up 0.3% for the week. The S&P 500 was up 0.1% for the week, down 3.38 points, or 0.05%, at 6,734.11 and the Nasdaq Composite was up 30.23 points, or 0.13%, at 22,900.59, leaving it with a weekly loss of about 0.5%.
MSCI’s gauge of shares across the globe was down 4.37 points, or 0.44%, at 995.79, leaving it with a gain of about 0.4% for the week.
Earlier the pan-European STOXX 600 index and Europe’s broader FTSEurofirst 300 index both closed down about 1%.
Before Wall Street opened, MSCI’s broadest gauge of Asian shares outside Japan closed down 1.5%.
US Treasury yields edged higher after falling earlier in the day. The yield on benchmark US 10-year notes rose 3.5 basis points to 4.146%, from 4.111% late Thursday. The 2-year note yield, which typically moves with interest rate expectations for the Federal Reserve, rose 1.9 basis points to 3.608% from 3.589% late Thursday.
In currencies, the dollar rose against the euro and was almost flat against the yen as stocks recovered somewhat and traders weighed the Fed’s next move.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.02% to 99.26 with the euro down 0.08% to $1.1622.
The Japanese yen strengthened 0.02% against the greenback to 154.55 per dollar.
Sterling weakened 0.14% to $1.3171 after a report said Finance Minister Rachel Reeves has scrapped plans to raise income tax rates in the next budget, raising questions over plans to balance public finances.
Among cryptocurrencies, Bitcoin fell 3.93% to $94,920.96. Ethereum fell 0.49% to $3,164.35.
Oil prices settled above $1 on supply fears after the Black Sea port of Novorossiysk halted oil exports following a Ukrainian drone attack on an oil depot in a key Russian energy hub.
US crude was up 2.39%, or $1.40, at $60.09 a barrel and Brent was up 2.19%, or $1.38, at $64.39 a barrel.
Gold prices fell after Fed officials’ hokey comments. Spot gold fell 2.12% to $4,082.76 an ounce. US gold futures fell 2.4% to $4,086.50 an ounce.
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