FiscalFusion

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 after months of smooth gains, and they stem from two unanswered questions: Have prices for Nvidia, bitcoin and other Wall Street stars climbed too high, and is the Federal Reserve finished with its interest-rate cuts? On the latter question, markets found some assurance from a speech by Federal Reserve Bank of New York President John Williams, who said he sees “room for a further adjustment” to interest rates, which could signal support for another rate cut in December. But other Fed officials have argued against a December cut because inflation remains high, and the uncertainty from their disagreement has fueled dramatic market swings. Thursday’s volatile session saw stocks surge early after Nvidia eased AI-bubble worries, only to plunge in the sharpest reversal since April, when President Donald Trump shocked markets with his “Liberation Day” tariffs. Despite Nvidia’s strong results, questions persist about whether massive AI-chip spending by Amazon, Meta Platforms and others will truly deliver long-term profits and productivity gains. AI-linked stocks stayed volatile Friday: Nvidia swung from an early gain to a 4.3% drop before finishing down 1%, while Amazon flipped from a loss to a 1.6% gain.

Bitcoin briefly fell below $81,000 before rebounding toward $85,000, down from nearly $125,000 last month and back to April levels. Nearly 90% of S&P 500 stocks rose despite the turmoil, though their moves are often overshadowed by the enormous influence of Big Tech. “When the largest companies drive most of the losses, the market can look weaker than it really is,” said Brian Jacobsen of Annex Wealth Management. Retailers helped lead the market: Gap jumped 8.2% after reporting better-than-expected profit, with CEO Richard Dickson noting strong sales at Old Navy, Gap, and Banana Republic; Ross Stores rallied 8.4% after also beating expectations and raising its holiday forecast. Homebuilders climbed on hopes that lower rates could boost the housing market, with D.R.

Horton up 6.8%, Lennar up 5.9%, and PulteGroup up 5.2%. All told, the S&P 500 rose 64.23 points to 6,602.99, the Dow gained 493.15 to 46,245.41, and the Nasdaq climbed 195.03 to 22,273.08. Treasury yields eased as traders bet on a nearly 72% chance of a December Fed cut, up sharply from 39% a day earlier, sending the 10-year yield down to 4.06% from 4.10%. Overseas, markets were mixed in Europe and tumbled in Asia after Thursday’s U.S. reversal, with Japan’s Nikkei 225 down 2.4% and South Korea’s Kospi down 3.8%..