US equity markets advanced on Friday after Federal Reserve Governor Christopher Waller said inflation was low enough to justify a potential rate cut as soon as next month, offering a more dovish outlook than Fed Chair Jerome Powell had earlier in the week.
The Dow Jones Industrial Average rose by 150 points, or 0.4%, while the S&P 500 climbed 0.5%. The Nasdaq Composite led gains with a 0.6% rise.
The move higher came as traders responded positively to Waller’s comments and as oil prices retreated, easing concerns over escalating tensions in the Middle East.
Despite the geopolitical backdrop, all three major indices are set to end the week with gains.
The S&P 500 is up 0.6% so far this week. The Dow has risen 0.4%, and the Nasdaq has posted a stronger 1.5% gain, supported by strength in technology shares and easing inflation concerns.
Waller gives hope for July rate cut
Appearing on CNBC’s Squawk Box, Waller said the Federal Reserve may be in a position to begin cutting rates as early as July, citing what he described as a sufficient cooling in inflationary pressures.
“I think we’re in the position that we could do this and as early as July,” Waller said. “That would be my view, whether the committee would go along with it or not.”
His remarks contrasted with those made by Chair Powell on Wednesday, who said the Fed was in “no hurry” to reduce rates and would remain dependent on incoming economic data, especially given uncertainty around the economic impact of President Donald Trump’s newly imposed tariffs.
Stocks had closed slightly lower following Powell’s comments, as markets interpreted the Fed’s stance as cautious in the face of economic and geopolitical crosscurrents.
Iran-Israel tensions simmer
Adding to Friday’s positive sentiment was a pullback in oil prices. Brent crude, the international benchmark, dropped more than 3%, while US. crude futures fell 0.2%.
The declines followed comments from Trump that he would delay a decision on whether the US would launch a military strike on Iran.
“There’s a substantial chance for negotiations,” Trump said Thursday, signaling he would decide on a response to Iran “within the next two weeks.”
The easing in oil prices comes as traders weigh the implications of possible US military involvement in response to recent hostilities.
According to reports, Israeli Prime Minister Benjamin Netanyahu has directed the country’s military to prepare strikes on “strategic” and “government” targets in Iran.
The White House has said Trump is weighing direct involvement in a strike on Tehran.
Iran’s Supreme Leader Ayatollah Ali Khamenei dismissed Trump’s prior call for “complete surrender,” calling it “threatening and ridiculous.”
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