Stocks were choppy to start Friday, but took a notable turn higher after a speech from New York Fed President John Williams temporarily eased rate-cut worries. Still, the main indexes finished with big weekly losses – putting them on track for their worst November in years.
The Federal Reserve lowered the federal funds rate by a quarter-percentage point at its September and October meetings. And one month ago, futures traders were pricing in 98% odds of another rate cut in December. But expectations eased back in recent weeks after Fed Chair Jerome Powell said a December cut wasn't a sure thing and the September jobs report came in stronger than expected.
According to CME FedWatch, the probability of a quarter-point cut when the Fed concludes its next gathering on December 10 is now at 72% – up from 39% one day ago – after Williams, one of the highest ranked Fed officials, said Friday that he sees "room for a further adjustment in the near term" to bring interest rates closer to neutral.
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"My assessment is that the downside risks to employment have increased as the labor market has cooled, while the upside risks to inflation have lessened somewhat," Williams said in his speech to economists in Santiago, Chile. "Underlying inflation continues to trend downward, absent any evidence of second-round effects emanating from tariffs."
"Economic data also supported the recovery [in stocks], as Flash PMIs signaled the fastest pace of growth this month since July, bolstering optimism about corporate earnings resilience," says José Torres, senior economist at Interactive Brokers.
Indeed, S&P Global's Flash Composite Purchasing Managers Index (PMI) and its Services PMI both hit a four-month high in November.
"The flash PMI data point to a relatively buoyant U.S. economy in November, signaling annualized GDP growth of about 2.5% so far in the fourth quarter," says Chris Williamson, chief business economist at S&P Global Market Intelligence. "The upturn also looks encouragingly broad-based for now, with output rising across both manufacturing and the vast services economy."
Not all the news was good news, though, with the Flash Manufacturing PMI hitting a four-month low. According to Williamson, manufacturers "reported a worrying combination of slower new orders growth and … accumulation of unsold inventory."
At the close, the tech-heavy Nasdaq Composite was up 0.9% at 22,273, the broader S&P 500 was 1.0% higher at 6,603 and the blue-chip Dow Jones Industrial Average had gained 1.1% to 46,245.
Bitcoin sinks to its lowest level since April
While the stock market managed a late-week turnaround, bitcoin did not. The price of bitcoin, which trades 24 hours a day, was last seen down 2% to trade at $84,432 – the lowest it's been since late April. The cryptocurrency has now shed nearly 33% since its early October peak above $126,000.
"The damage in the crypto sector, always volatile, is now the worst since 2022, says Louis Navellier, chairman and founder of Navellier & Associates. "Often seen as an indication of risk sentiment, the huge correction is now forcing liquidation among several dealers and has caused a selloff of all the alternative coins."
Bernstein analyst Gautam Chhugani isn't overly worried about the slump. "We believe institutional (and eventually sovereign) ownership of bitcoin is a structural long-term trend and the current price action reflects a (relatively) shallow and short-term correction."
Gap earnings help retail stock extend its rebound
In single stock news, Gap (GAP) shares surged 8.2% after the specialty apparel retailer reported higher-than-expected third-quarter earnings and revenue and same-store-sales growth of 5%. Gap also raised the bottom end of its full-year sales forecast.
The retail stock is now up nearly 27% from its mid-October lows, but Morgan Stanley analyst Alex Straton thinks there's more room to run. The analyst reiterated her Overweight (Buy) rating on Gap after earnings and lifted her price target to $31 from $30 – representing implied upside of 24% to current levels.
"GAP's Q3 print offers further evidence that management's brand reinvigoration initiatives are proving successful, with performance becoming increasingly more consistent," Straton says.
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