By Sinéad Carew and Dhara Ranasinghe
NEW YORK/LONDON (Reuters) -Wall Street shook off earlier losses, outperforming Asia and Europe on Friday as equity investors hunted for bargains even as U.S. Treasury yields rose after hawkish Federal Reserve officials trounced on hopes for a December interest rate cut.
While safe-haven gold prices fell, the dollar index edged up after blue-chip bourses from Tokyo to Paris had closed lower. And in London, fresh concern about Britain’s upcoming budget had added to pain across UK markets.
Citing inflation worries and signs of relative stability in the labor market after two U.S. rate cuts this year, a growing number of Fed policymakers have signaled reticence on further easing.
On Friday, Kansas City Federal Reserve President Jeffrey Schmid added to the chorus, noting that his concerns about “too hot” inflation go well beyond the narrow effects of tariffs alone, suggesting that he could dissent at the Fed’s December meeting if policymakers opt to cut rates again.
After 43 days of assessing Fed policy without official data due to a record-long U.S. government shutdown, traders took heed of the central bankers’ comments and were pricing in a 46% chance of a quarter-point December Fed cut, down from the 66.9% probability they were betting on a week ago, according to CME Group’s FedWatch tool.
Still after opening lower, the Nasdaq and the S&P 500 clawed their way back to gains as they set aside recent jitters over frothy valuations in speculative and heavyweight technology stocks.
“The rest of the world was weak because they were following the lead of the U.S market on Thursday,” said Andrew Slimmon, senior portfolio manager at Morgan Stanley Investment Management but he noted that Wall Street trading was driven by “a bid in the stocks that have led the decline in the last few days.”
“People are conditioned to buy the dip. It has been a great strategy. And you’re at a time in the year when the winners keep winning. That’s why the stocks that are working today have been the winners since the low in April,” he said.
Along with other Magnificent 7 stocks, AI chip leader Nvidia rose more than 2%. The S&P 600 technology index shook off earlier losses to add more than 1% on Friday.
Investors are also looking forward to quarterly earnings from Nvidia and a host of retailers in the week ahead could shed light on the state of the consumer and the AI market.
As of 2:44 p.m. ET on Wall Street, the Dow Jones Industrial Average fell 170.91 points, or 0.36%, to 47,286.31, the S&P 500 rose 21.93 points, or 0.33%, to 6,759.42 and the Nasdaq Composite rose 120.10 points, or 0.53%, to 22,990.45.
MSCI’s gauge of stocks across the globe was down 2.03 points, or 0.20%, to 998.13 after paring earlier losses.
Earlier the pan-European STOXX 600 index and Europe’s broad FTSEurofirst 300 index had both closed down about 1%.
And overnight, MSCI’s broadest gauge of Asian shares outside of Japan had fallen 1.5%, while Japan’s Nikkei slid 1.8% and South Korea dropped 3.8%. Chinese shares fell 1.6% after data showed October industrial output and retail sales slowed.
U.S. Treasury yields turned higher after an initial drop as the Wall Street selloff ushered investors into less-risky assets while they marked time for the reopened government to resume publishing economic indicators.
The yield on benchmark U.S. 10-year notes rose 3.3 basis points to 4.144%, from 4.111% late on Thursday while the 30-year bond yield rose 4.4 basis points to 4.7458%. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 1.9 basis points to 3.608%.
In currencies, the safe haven Swiss franc gave up earlier gains while Britain’s sterling also weakened.
The dollar was last up 0.13% against the Swiss franc while sterling weakened 0.19% to $1.3164, after a report said Finance Minister Rachel Reeves scrapped plans to raise income tax rates in the upcoming budget, raising questions on plans for balancing public finances.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.07% to 99.31, with the euro down 0.13% at $1.1616. Against the Japanese yen, the dollar was down 0.01% at 154.54.
In cryptocurrencies, bitcoin fell 3.45% to $95,398.49 while ethereum rose 0.35% to $3,191.23.
Oil prices settled up more than $1 on supply fears after the Black Sea port of Novorossiisk halted oil exports following a Ukrainian drone attack on an oil depot in the major Russian energy hub.
U.S. crude settled up 2.39%, or $1.40 at $60.09 a barrel and Brent settled at $64.39 per barrel, up 2.19% or $1.38 on the day.
Gold prices dropped almost 2% on Friday after the Fed officials’ hawkish remarks. Spot gold fell 1.93% to $4,090.51 an ounce. U.S. gold futures fell 2.24% to $4,093.00 an ounce.
(Reporting by Sinéad Carew in New York, Dhara Ranasinghe and Iain Withers in London; Gregor Stuart Hunter in Singapore, Stella Qiu in Sydney; editing by Mark Heinrich, Louise Heavens, Richard Chang and Diane Craft)
