The S&P 500 and the Dow were subdued in choppy trading on Friday after comments from a policy maker dampened recent optimism about potential rate cuts next year, though the benchmark index was set for its longest weekly winning streak in over six years.
New York Federal Reserve President John Williams pushed back on surging market expectations of interest rate cuts, saying the U.S. central bank is still focused on whether it has monetary policy on the right path to continue bringing inflation back to its 2% target.
The comments came after the Fed left interest rates unchanged on Wednesday, acknowledging slowing inflation and indicated lower borrowing costs were on the horizon, causing the Dow Jones Industrial Average (.DJI) to notch its second straight record high close on Thursday.
“They (Fed) didn’t really emphasize (the wage environment) as much of a risk to their inflation forecast as was expected. What you saw with that was a change in expectations for Fed actions,” said Matt Stucky, chief portfolio manager of equities at Northwestern Mutual Wealth Management Company.
“(The market) has been probably more volatile as a result of this and as John Williams walked those comments back a bit.”
Money markets, however, still see a 76.1% chance of at least a 25-basis point rate cut as soon as March and are pricing in a 96.6% chance of another cut in May, according to CME Group’s FedWatch tool.
Despite the session’s move on Friday, the dovish turn of events this week caused equities to rally, with the benchmark S&P 500 (.SPX) eyeing its longest weekly winning streak since September 2017.
On Friday, a survey showed domestic business activity picked up in December amid rising orders and demand for workers, which could further help to allay fears of a sharp slowdown in economic growth in the fourth quarter.
Later in the day, the expiry of quarterly derivatives contracts tied to stocks, index options and futures, also known as “triple witching”, could potentially stoke market volatility, although stock swings have been muted recently.
At 11:40 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 13.18 points, or 0.04%, at 37,261.53, the S&P 500 (.SPX) was up 0.45 points, or 0.01%, at 4,720.00, and the Nasdaq Composite (.IXIC) was up 67.48 points, or 0.46%, at 14,829.04.
Six of S&P 500’s 11 sectors were in the red, with utilities (.SPLRCU) and rate-sensitive real estate stocks (.SPLRCR) leading declines.
Propping up the tech-heavy Nasdaq were megacaps such as Microsoft (MSFT.O), Nvidia <NVDA.O> and Amazon.com (AMZN.O), adding between 1.1% and 1.5%.
Intel (INTC.O) rose 4.1% after BofA Global Research upgraded the chipmaker’s shares to “neutral” from “underperform”, while Broadcom (AVGO.O) advanced 3.4% to hit a record high of nearly $1,150.
Costco Wholesale (COST.O) rose 3.9% after the retailer topped Wall Street estimates for first-quarter results due to demand for cheaper groceries.
Darden Restaurants (DRI.N) slipped 1.2% after the Olive Garden owner forecast annual same-store sales below estimates.
Declining issues outnumbered advancers for a 1.47-to-1 ratio on the NYSE and a 1.27-to-1 ratio on the Nasdaq
The S&P index recorded 48 new 52-week highs and two new lows, while the Nasdaq recorded 138 new highs and 54 new lows.
