Key Takeaways
- Dow Jones surges 662 points as Fed signals potential December rate cut
- Nvidia rebounds on reports of possible H200 chip sales to China
- All three major indexes still finish week in negative territory
- Small-cap Russell 2000 jumps 2.8%, narrowing weekly losses
US stocks closed sharply higher on Friday, with the Dow Jones Industrial Average jumping 662 points (1.5%) after Federal Reserve President John Williams suggested more interest rate cuts could be coming this year. The Nasdaq and S&P 500 both gained 1.4%, boosted by a strong recovery in Nvidia shares.
Fed Rate Cut Expectations Surge
New York Fed President John Williams stated, “I view monetary policy as being modestly restrictive… I still see room for a further adjustment in the near term.” His comments led investors to believe the Fed will implement its third rate cut of 2025 in December.
Fed funds futures showed the probability of a rate cut jumped to over 70%, up from less than 40% just a day earlier. Rate-sensitive stocks including Home Depot, Starbucks and McDonald’s advanced as investors anticipated lower rates would stimulate consumer spending.
Jay Hatfield commented, “We think there definitely should be a cut… It’s going to depend on the next … employment report.”
Tech and Semiconductor Recovery
Nvidia shares climbed more than 1% following a Bloomberg News report indicating the Trump administration might approve H200 chip sales to China, though no final decision has been made. This marked a significant rebound from Thursday’s sharp decline, when Nvidia’s earlier rally collapsed despite strong earnings.
Raymond James resumed coverage of Nvidia with a “strong buy” rating and AMD with “outperform,” citing long-term growth potential for both companies. The firm noted Nvidia has “significant competitive moats” while AMD is well-positioned to compete in GPUs, with price targets suggesting 51% upside for Nvidia and 83% for AMD.
Weekly Performance and Sector Moves
Despite Friday’s strong rally, all three major indexes finished the week lower. The S&P 500 and Dow both declined more than 1%, while the Nasdaq dropped approximately 2%.
Hatfield characterized the recent market weakness as “a normal, seasonal, post-earnings valuation pullback,” adding that “the bubbles portion of the market getting annihilated.”
Alphabet emerged as the top performer among the “Magnificent Seven” stocks, rising 2% on Friday and about 7% for the week. The company’s new Gemini 3 AI model and strong TPUs drove enthusiasm, with Alphabet now showing the best yearly gain in the group at 56%, followed by Nvidia at approximately 33%.
Small Caps and Crypto Movement
Small-cap stocks staged an impressive recovery, with the Russell 2000 index surging 2.8% and reducing its weekly loss to under 1%. The ITB Home Construction ETF jumped nearly 6%, heading for its best day since July 22 as investors positioned for potential rate cuts.
In cryptocurrency markets, Bitcoin fell nearly 3% on Friday and declined over 11% for the week, reaching levels not seen since April. Hatfield noted, “The only real question is, ‘Where do we bottom out at?’”
