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Dec. 21, 2018 / 4:27 PM GMT
By Thomas Franck, CNBC
U.S. stocks erased early gains Friday, falling into negative territory as a week-long equity exodus put the major indexes on track for one of their worst weeks of the year.
The Dow Jones Industrial Average turned negative after trading as much as 300 points higher early in the session. The initial tick upward came as Federal Reserve Bank of New York President John Williams said that the central bank could reassess its interest rate policy and balance sheet reduction in the new year if the economy slows. Athletic apparel company Nike, a Dow component, rallied nearly 9 percent following strongearnings results.
The broader S&P 500 fell 0.2 percent and the tech-heavy Nasdaq Composite shed 0.9 percent.
Stocks are on track for steep losses for the trading week and the month of December.
Stocks initially caught an early bid Friday morning after New York Fed President Williams said the central bank was listening to the market, and could re-evaluate its outlook for two rate hikes next year.
“We are listening, there are risks to that outlook that maybe the economy will slow further,” Williams told Steve Liesman on CNBC’s “Squawk on the Street” Friday.
“What we’re going to be doing going into next year is re-assessing our views on the economy, listening to not only markets but everybody that we talk to, looking at all the data and being ready to reassess and re-evaluate our views,” he said.
U.S. equities rallied sharply during the interview, but quickly staged an about-face thereafter.
“This is a real magnificent speech and much different from what most of us are accustomed to,” said Anthony Chan, Chief Economist at J.P. Morgan Chase. “The concern of the market was: what is the Federal Reserve going to do with the fed funds rate in 2019? John Williams told us everything’s on the table, they can adjust that path.”
“Then of course the markets are really worried about that autopilot situation on the balance sheet,” Chan added. “Once again, John Williams said even that is on the table, that if things were to shift, that the Federal Reserve would be flexible on that.”