Key Points
- U.S. stock futures rose on Friday after a key Fed official hinted at a possible December rate cut.
- The market had previously been hit by strong jobs data, which had lowered expectations for a rate cut.
- Despite Nvidia’s strong earnings report, concerns about an AI bubble persist.
- Retailers like Gap and Ross Stores reported positive results, boosting their stock prices.
U.S. stock futures rose on Friday, bouncing back from a volatile session the day before. The rebound was sparked by comments from New York Federal Reserve President John Williams, who hinted at a possible interest rate cut in December.
As of 09:10 ET, Dow Jones Futures were down 0.84%, S&P 500 Futures decreased by 1.56%, and Nasdaq 100 Futures were down 2.38%. However, all three major U.S. stock indexes are still on track for a losing week.
On Thursday, stronger-than-expected job growth data initially hit the market, prompting traders to lower their bets on a rate cut next month. This bad news overshadowed Nvidia’s strong third-quarter results and upbeat guidance, making it the world’s most valuable company and a symbol of the AI boom.
However, those fears were calmed on Friday after Williams said he sees “room for a further adjustment in the near term” for interest rates. He noted that the employment risks have increased, while the risks of high inflation have decreased. Following his comments, traders increased the odds of a December rate cut to over 50%, up from nearly 37% earlier.
Despite this, the mood on Wall Street is still fragile. Strong results from Nvidia weren’t enough to completely erase concerns about an artificial intelligence bubble. These fears were fueled by investor Michael Burry, who famously predicted the 2008 financial crisis, warning that the real demand for AI is much lower than current valuations suggest.
In other news, the retail sector remained in focus. Gap’s stock rose after the clothing retailer beat sales expectations, thanks to strong demand for its Old Navy and Banana Republic brands. Ross Stores also saw its stock rise after beating Wall Street’s expectations.
In the commodity markets, oil prices fell, continuing their recent losses as traders considered a potential Russia-Ukraine peace deal that could increase global supply. Both Brent and U.S. crude are on track for weekly losses of over 2%.
