The Dow Jones Industrial Average rebounded on Friday after New York Federal Reserve President John Williams suggested the central bank could cut interest rates yet again this year.

The blue-chip index gained 529 points, or 1.2%. The Nasdaq Composite advanced 1.1%, as did the S&P 500

"I view monetary policy as being modestly restrictive, although somewhat less so than before our recent actions," Williams said in remarks for a speech in Santiago, Chile. "Therefore, I still see room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral, thereby maintaining the balance between the achievement of our two goals."

The comments by a notable Fed member like Williams signaled to investors that central bank leadership is likely to lower its benchmark overnight borrowing rate at its upcoming December meeting. This led traders to raise bets that the central bank would, in fact, cut next month for the third time in 2025.

Fed funds futures are currently pricing in around a 70% chance of a quarter percentage point cut, a spike from the less than 40% likelihood priced in the day before, according to the CME FedWatch tool.

Stocks that could benefit the most from lower rates, which may spur consumer spending, led the market comeback. These included Home Depot, Starbucks and McDonald's.

Investors hope easier monetary policy can revive a sluggish economy and justify historically high tech-stock valuations.

"We think there definitely should be a cut," Jay Hatfield, Infrastructure Capital Advisors founder and CEO, said in an interview with CNBC. "It's going to depend on the next employment report. It would have to be pretty weak, I think, to convince people to cut."

Wall Street is coming off a brutal market reversal in the last session. The Dow at one point on Thursday rose more than 700 points as investors cheered a blockbuster Nvidia fiscal third-quarter earnings report.

The benchmark, along with the S&P 500 and Nasdaq Composite, ended the day sharply lower as the Nvidia rally fizzled and worries grew that the Fed would stand pat in December on rates. The AI darling finished with a more than 3% decline.

Even with Friday's moves, the three major averages are still headed for big losses this week. The S&P 500 is down almost 2% week to date, as is the 30-stock Dow. The Nasdaq has shed more than 2%.

When speaking about the recent pressure, Hatfield believes that "this is a normal, seasonal, post-earnings valuation pullback," adding that "the bubbles portion of the market is getting annihilated."

Source: CNBC