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Financial Markets 11/21 15:38
NEW YORK (AP) -- 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% before finishing with a gain of 1%. The Dow Jones Industrial
Average climbed 493 points, or 1.1%, and the Nasdaq composite rose 0.9%.
It was a fitting finish for a week that left the S&P 500 just 4.2% 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% and
then swung back and forth before finishing with a loss of 1%, for example.
Amazon went from an early loss to a gain of 1.6%.
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% 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% 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% 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%, Lennar rose 5.9% and PulteGroup gained 5.2%.
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% probability of a December cut, up
sharply from 39% a day before, according to data from CME Group. That helped
send the yield on the 10-year Treasury to 4.06% from 4.10% 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%, and South Korea's Kospi dropped 3.8% for two
of the larger losses.
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AP Writers Teresa Cerojano and Matt Ott contributed.
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