The S&P 500 Index ($SPX) (SPY) on Friday closed down -0.05%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.65%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.06%. December E-mini S&P futures (ESZ25) fell -0.02%, and December E-mini Nasdaq futures (NQZ25) rose up +0.10%.
US stock indexes on Friday recovered from early losses and settled mixed after the Magnificent Seven technology stocks recovered from early losses and traded mixed. Also, strength in energy producers was positive for the overall market, as WTI crude oil prices rose by more than +2%.
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Stocks initially extended Thursday’s sell-off on Friday amid concerns about a hawkish Fed pivot. Doubts over a Fed interest rate cut next month have fueled jitters about stretched valuations of AI-infrastructure and semiconductor stocks and sparked long liquidation in stocks and risk-off sentiment in asset markets.
The chances of a Fed rate cut at December’s FOMC meeting have dropped to 43% on Friday from 70% last week, after a parade of Fed officials this week expressed skepticism about the need for additional rate cuts, citing the economy’s resilience and lingering uncertainty about inflation.
Hawkish Fed comments on Friday also bolstered the outlook for the Fed to refrain from cutting interest rates at next month’s FOMC meeting. Kansas City Fed President Jeff Schmid said, “I don’t think further cuts in interest rates will do much to patch over any cracks in the labor market but could have longer-lasting effects on inflation as our commitment to our 2% objective increasingly comes into question.” Also, Dallas Fed President Lorie Logan said, “I think it would be hard to support another rate cut unless we were to get convincing evidence that inflation is really coming down faster than my expectations or that we were seeing more than the gradual cooling that we’ve been seeing in the labor market.”
Weak economic news from China on Friday added to concerns about global growth prospects and weighed on stocks. China’s Oct industrial production rose +4.9% y/y, weaker than expectations of +5.5% y/y and the smallest increase in 14 months. Also, China’s Oct new home prices fell -0.45% m/m, the biggest decline in a year and the twenty-ninth consecutive month that new home prices have fallen.
The price of Bitcoin (^BTCUSD) tumbled more than -4% to a 6.25-month low as the 5-week-long sell-off continues. Bitcoin has fallen by -24% from its record high last month amid heavy long liquidation pressure. Bitcoin ETFs saw net outflows of about $870 million on Thursday, the second-largest daily withdrawal since trading in Bitcoin ETFs began.
On Wednesday, President Trump signed legislation that ended the longest US government shutdown in history. The bill provides full-year funding for some departments, funds other agencies through January 30, and includes pay for furloughed government workers. The bill also resumes federal payments to states and localities and recalls agency employees who were laid off during the shutdown.