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Investing.com -- The S&P 500 jumped Friday, as AI stocks cut losses on reports that the U.S. is mulling allowing Nvidia to sell its AI chips sales to China, while hopes for rate cut were boosted after Federal Reserve President John Williams pointed towards a potential interest rate cut in December.
At 1:57 p.m. ET (18:57 GMT), the Dow Jones Industrial Average rose 693 points, or 1.5%, the S&P 500 index gained 1.4%, and the NASDAQ Composite climbed 1.5%.
Even with this positive start, all three major U.S. stock indexes on track for a losing week following tech-led selling on concerns over elevated valuations.
Big tech rebounds as chips cut losses on Trump reportedly mulling lifting ban on Nvidia chip sales to China
NVIDIA Corporation (NASDAQ:NVDA) cut losses to help push tech higher amid a report U.S. officials are flirting with the idea of lifting a ban on Nvidia H200 AI chips to China.
US officials are in early talks on whether to allow Nvidia to sell its H200 AI chips to China, according Bloomberg reported, citing familiar with the matter.
The move lifted sentiment on AI names, which have soured by concerns about an artificial intelligence bubble. Investor Michael Burry, famous for predicting the 2008 financial crisis, warned recently that true end demand for AI was far less than what valuations were suggesting.
That said, analysts at Capital Economics offering some optimism, stating, in a note, that "if the AI stock market boom turned to bust, we suspect the correction would be somewhat smaller but significantly shorter-lived than the one that took place after the dotcom bubble burst."
Fed’s Williams boosts rate cut hopes
Sentiment received a boost Friday after Williams said, in a speech at the Central Bank of Chile Centennial Conference, that he sees "room for a further adjustment in the near term to the target range for the federal funds rate." He noted that downside risks to employment have increased while upside risks to inflation have lessened.
Williams described current monetary policy as "modestly restrictive" and indicated a desire to move the policy stance "closer to the range of neutral."
Following Williams’ comments, traders boosted the odds of a December rate cut to nearly 70%, up from nearly 29% a day earlier.
These comments partly allayed concerns exacerbated by stronger-than-expected job growth for September, detailed by the delayed jobs report released on Thursday, that the Fed will keep interest rates unchanged next month.
Gap shines on earnings stage as retail sector earnings remain in focus
The retail sector remained in focus Friday, with BJs Wholesale Club Holdings (NYSE:BJ) stock gaining after the wholesale club operator’s third-quarter fiscal 2025 earnings exceeded expectations, prompting a raising of its full-year profit outlook on the strength of growing membership income.
Additionally, Gap (NYSE:GAP) stock rose after the clothing retailer beat expectations for third-quarter comparable sales, helped by strong marketing-driven demand for its Old Navy and Banana Republic brand apparel even amid economic uncertainty.
Ross Stores (NASDAQ:ROST) also gained after the off-price retailer beat Wall Street’s expectations, with the company’s chief executive officer saying that it has seen an “excellent back-to-school season with strong trends that continued through the balance of the quarter.”
Peter Nurse, Ambar Warrick contributed to this article