Dow Jumps 700 Points as Fed Comments Spark Major Market Rebound
Stocks snapped back sharply on Friday, with the Dow Jones Industrial Average surging 709 points (+1.6%) after New York Fed President John Williams signaled the central bank may cut rates again before year-end.
The S&P 500 gained 1.3%, while the Nasdaq rose 1.1% as investors rushed back into risk assets following one of the toughest weeks for markets since early fall.
Williams, speaking in Santiago, Chile, noted that monetary policy is “modestly restrictive” and said he sees “room for a further adjustment in the near term” — widely interpreted as support for another rate cut at the December meeting.
Markets reacted instantly.
The probability of a December cut jumped from under 40% to nearly 70%, according to CME FedWatch.
Rate-Sensitive Sectors Lead the Rebound
Lower-rate beneficiaries — Home Depot, Starbucks, McDonald’s — powered higher as traders bet that easier financial conditions could revive consumer spending and support stretched tech valuations.
This comes after a wild Thursday session where stocks initially surged on Nvidia’s blowout fiscal Q3 earnings, only to collapse into the close as fears grew the Fed might hold rates steady.
Even after Friday’s rebound, markets remain deeply red for the week:
- S&P 500: –2%
- Dow: –2%
- Nasdaq: –3%
Bitcoin also continued its slide, dropping another 2% Friday and now down more than 10% week-to-date, hovering at its lowest levels since April as investors pull back from high-octane risk assets.
Small Caps Rip Higher
The Russell 2000 — which had been crushed during the week — roared back with a 2.8% jump, sharply outperforming the S&P 500’s 1.3% gain.
The move narrowed its week-to-date decline to under 1%, signaling improved sentiment in economically sensitive stocks.
AI Sector Faces a Reality Check
Even as markets rebounded, Wall Street remains cautious on the AI-driven trade. Barclays strategist Emmanuel Cau said that Nvidia’s latest blockbuster earnings failed to ease broader concerns about the return on investment behind the enormous AI capex boom.
According to Barclays, investors are increasingly uneasy about:
- AI monetization timelines
- Record hyperscaler capex
- Power demand constraints
- Circular funding between chip suppliers and model developers
The divergence within the “Magnificent 7” tells the story:
- Alphabet: only megacap in the green this week
- Microsoft & Amazon: –7%
- Nvidia: –5.5%
Analysts say the AI trade may be entering a more “mature phase,” where scrutiny and selectivity replace the early-cycle euphoria.
WSA Take
Friday’s surge doesn’t erase the structural volatility building beneath the surface. Markets are now fully trading on Fed expectations, AI capex skepticism, and macro data delayed by the shutdown. With Nvidia volatility still spilling over into megacaps, traders should expect more sharp rotations.
Read our recent coverage on the Warner Bros. Discovery Sale.
Explore more market insights on the Wall Street Access homepage.
Disclaimer
WallStAccess provides news and market commentary for informational and educational purposes only. This content is not investment advice. Always conduct independent research or consult a licensed financial professional before making investment decisions.
