Published by Global Banking & Finance Review®
Posted on November 21, 2025
4 min readLast updated: January 20, 2026
Add as preferred source on GoogleUS stocks surged on Friday with hopes of a Fed rate cut, despite losing ground over the week. Tech valuations and Treasury yields were key factors.
By Stephen Culp
NEW YORK (Reuters) -Wall Street stocks closed sharply higher on Friday as rising expectations of a December interest rate cut by the Federal Reserve offset concerns over lofty tech valuations.
A broad rally started gathering momentum by late morning, pushing all three major U.S. stock indexes to substantial gains on the day.
Benchmark Treasury yields fell, the dollar was steady and bitcoin pared its losses.
The volatile session caps a tumultuous week in which U.S. and world stocks lost ground from last Friday's close.
The Fed, deprived of official U.S. economic data during the recently ended government shutdown, at last got a fresh glimpse of the labor market on Thursday, which showed the unemployment rate unexpectedly ticking higher.
As a result, financial markets are pricing in an increased likelihood of a third and final rate cut this year from the Fed. CME's FedWatch tool sets the odds at 73.3%, a significant bump from 39.1% on Thursday.
Messaging from monetary policymakers is mixed. New York Fed President John Williams said the Fed could still cut rates in the near term, while Dallas Fed President Lorie Logan called for them to be left on hold while the central bank assesses the effect of current rates on the economy.
"New York Fed President Williams' comments seem to have shifted the perception on that December rate cut potential," said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky.
"Part of the reason for the move today is that Williams was seen as one of the hawkish leans, so the market could perceive it representing someone stepping over the line towards the dovish point of view."
"Other than that, yesterday was a pretty broad and rough selling day into the close, so (the market was) primed for some bounce," Mayfield added.
Solid earnings from artificial intelligence vanguards, notably chipmaker Nvidia, momentarily eased concerns that AI-related tech stocks, which powered the stock market's rally in recent months, are overpriced and could be due for a correction.
The third-quarter earnings season is nearly wrapping up, with more than 94% of the companies in the S&P 500 having reported. Of those, 83% beat earnings estimates, according to LSEG data.
The Dow Jones Industrial Average rose 493.30 points, or 1.08%, to 46,245.56, the S&P 500 rose 64.20 points, or 0.98%, to 6,602.96 and the Nasdaq Composite rose 195.04 points, or 0.88%, to 22,273.08.
European stocks ended lower, logging a weekly decline due to worries over stretched tech valuations, while defense shares slid on signs of progress toward ending Russia's war on Ukraine.
MSCI's gauge of stocks across the globe rose 2.73 points, or 0.28%, to 971.26.
The pan-European STOXX 600 index fell 0.33%, while Europe's broad FTSEurofirst 300 index fell 7.27 points, or 0.32%.
Emerging market stocks fell 36.17 points, or 2.64%, to 1,335.37. MSCI's broadest index of Asia-Pacific shares outside Japan closed lower by 2.67%, at 685.82, while Japan's Nikkei fell 1,198.06 points, or 2.40%, to 48,625.88.
The dollar looked set to register a weekly gain but weakened against the yen, as Japanese officials stepped up their verbal intervention to stem the yen's decline.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.01% to 100.15, with the euro down 0.09% at $1.1517.
Against the Japanese yen, the dollar weakened 0.68% to 156.41.
Cryptocurrencies sank to multi-month lows amid a broader flight from riskier assets. Bitcoin fell 2.93% to $84,661.00. Ethereum declined 4.64% to $2,744.76.
U.S. Treasury yields dipped as Fed rate cut bets rose.
The yield on benchmark U.S. 10-year notes fell 4.1 basis points to 4.063%, from 4.104% late on Thursday. The 30-year bond yield fell 1.7 basis points to 4.715% from 4.732% late on Thursday.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 5.1 basis points to 3.508%, from 3.558% late on Thursday.
Oil prices extended their decline for a third session, touching a one-month low as the U.S. pushed for a Russia-Ukraine peace deal.
U.S. crude fell 1.59% to settle at $58.06 per barrel, while Brent settled at $62.56 per barrel, down 1.29% on the day.
Spot gold fell 0.29% to $4,065.29 an ounce. U.S. gold futures fell 0.05% to $4,054.30 an ounce.
(Reporting by Stephen Culp; Additional reporting by Elizabeth Howcroft; Editing by Mark Potter, Richard Chang and Edmund Klamann)
A rate cut refers to a reduction in the interest rate set by a central bank, which can stimulate economic activity by making borrowing cheaper.
Monetary policy is the process by which a central bank manages the money supply and interest rates to influence economic activity.
Cryptocurrencies are digital or virtual currencies that use cryptography for security and operate on decentralized networks, typically based on blockchain technology.
Stock indexes are statistical measures that track the performance of a specific group of stocks, representing a portion of the stock market.
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