Wall Street ended a tumultuous week with a flat close as investors shrugged off concerns that a September rate rise was more likely than some investors expected.
Shares traded lower earlier in the session after Fed Vice Chairman Stanley Fischer told CNBC the Fed had not yet decided whether to raise interest rates in September. However, the market largely recovered in the final moments of trade.
After several volatile sessions that at one point pushed the S&P 500 to its lowest level since October 2014, the three major US indices ended the week with gains.
Many on Wall Street have been hoping the recent global market turbulence and worries about China’s economy would lead the Fed to hold off raising rates. This expectation was reinforced on Wednesday by comments from New York Fed President William Dudley.
However, following Fischer’s comments on Friday, overnight indexed swap rates implied traders now see a 35 percent chance the Fed would raise rates in September, up from 22 percent earlier in the week.
The Dow Jones industrial average ended down 0.07 percent at 16,643.01 while the S&P 500 edged up 0.06 percent to 1,988.87.
The Nasdaq Composite added 0.32 percent to end at 4,828.33, driven by a 2.52 pct rise in Intel Corp.
For the week, the Dow gained 1.1 percent, the S&P rose 0.9 percent and the Nasdaq added 2.6 percent.
European stocks closed out a rollercoaster week with modest gains, although a leading regional equity index was still on track for its worst month in four years due to underlying concerns over China.
The pan-European FTSEurofirst 300 index closed up 0.3 percent, while the euro zone’s blue-chip Euro STOXX 50 index rose 0.2 percent. Germany’s DAX edged down 0.2 percent, leaving it 17 percent below a record high in April.
Fears of a global economic slowdown, which intensified after China devalued its currency this month, triggered big price swings across equities, currencies and commodities this week.
It also led to 450 billion euros ($503 billion) being wiped off the FTSEurofirst on Monday, leaving the FTSEurofirst down nearly 10 percent so far in August – its worst monthly performance in four years.
However, worries that a Chinese economic slowdown may impact other countries have also led to expectations that the United States will not raise interest rates next month.
This caused equities to rebound later on this week, since rock-bottom interest rates have hit returns on bonds and cash, driving investors to the better returns available from stocks.
European shares also remain supported by record low interest rates and liquidity measures from the European Central Bank.