US stocks have risen after sell-offs triggered by the Fed

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US stocks rose on Friday after a sharp sell-off earlier in the week triggered by a hawkish message from the Federal Reserve.

The S&P 500 shrugged off early declines to close 1.1 percent higher.

On Wednesday, the Fed sparked a selloff in stocks as it scaled back the number of rate cuts it expected next year amid signs of stubbornly high inflation. But the central bank’s preferred target for price pressures came in slightly lower than expected on Friday at 2.4 percent for November, helping to ease some of the worries in the markets.

“People felt we had bottomed out, then we got a couple of positive catalysts,” said Michael O’Rourke, chief market strategist at broker JonesTrading, referring to the inflation numbers and growing hopes that Washington would reach a deal to avoid a government shutdown .

The S&P is 24 percent higher this year, but below levels earlier in December that were set to deliver Wall Street’s best year in five.

Barclays strategist Emmanuel Cau described the pullback earlier this week as a “reality check” after frenzied buying of speculative stocks and assets such as bitcoin, which have surged after Donald Trump’s US election victory on expectations of lower taxes and easier regulation.

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Ten-year Treasury yields fell 0.05 percentage points on Friday to 4.51 percent after inflation figures, after hitting a six-month high of 4.59 percent earlier in the week.

In comments that highlighted the debate at the Fed over the course of interest rates, Cleveland Fed President Beth Hammack said on Friday that she would prefer to keep borrowing costs on hold until there was “further evidence that inflation is resuming its path” to the central bank’s 2 percent target .

But New York Fed President John Williams pushed for further cuts, describing current monetary policy as “quite restrictive”.

Wall Street’s Friday bounce came too late to reverse all the pain for European shares, however, with the regional Stoxx Europe 600 closing up 0.9 percent.

A drop of more than 20 percent for Novo Nordisk dragged down the index after the Danish drugmaker reported disappointing results from tests of its latest obesity drug.

Trump added to the mood of caution early in Europe with a message on his Truth Social platform warning the EU that it must commit to buying US oil and gas on a large scale or face tariffs.

“The market has not been willing to believe or price in that Trump is serious about implementing tariffs,” said Gerry Fowler, head of European equity strategy at UBS. “Now that his comments are aimed more specifically at Europe, investors are taking note.”