Wall Street Opens Higher as Fed’s Waller Signals Rates Could Hold Steady in September

By COMFORT OGBONNA

U.S. stocks opened higher Thursday as investors responded to comments from Federal Reserve Governor Christopher Waller indicating that the central bank could leave interest rates unchanged at its September meeting if incoming inflation data shows that price pressures are continuing to ease.

The remarks helped reduce expectations for another interest-rate increase and offered some relief to investors after renewed military exchanges between the United States and Iran heightened geopolitical and economic uncertainty.

Waller said his decision on the appropriate direction of monetary policy would depend heavily on the August inflation figures. If the data shows continued progress toward the Federal Reserve’s 2% inflation target, he said he would be prepared to support keeping the policy rate at its current level.

However, Waller also cautioned that interest rates could still need to rise if inflation proves more persistent than expected. The comments underscored the uncertainty facing policymakers as they balance stubborn price pressures against concerns that higher borrowing costs could weigh on economic growth.

Financial markets continued to price in a significant possibility of a rate increase at the Fed’s September meeting, although expectations for a hike eased following Waller’s remarks. Traders were still assigning roughly a 48% probability to an increase, reflecting the unusually divided outlook ahead of the central bank’s Sept. 15-16 meeting.

Investors are also preparing for a potentially volatile month as they assess inflation, employment and geopolitical developments. September has historically been a difficult period for U.S. stocks, and uncertainty surrounding the economy and financial markets could contribute to larger swings in share prices.

Markets are now looking ahead to Friday’s closely watched jobs report for additional clues about the strength of the U.S. economy and the Fed’s likely policy path. A stronger-than-expected labor market could reinforce concerns that inflation will remain elevated, while signs of weakening employment could strengthen arguments for keeping rates unchanged.

Still, investors have been warned not to rely too heavily on any single economic report. Fed officials have continued to emphasize that controlling inflation remains a central priority, meaning even signs of softer employment may not be enough to guarantee a change in the central bank’s approach.

The outlook has been further complicated by rising oil prices. Brent crude futures gained 0.49% Thursday, extending a four-day advance as tensions in the Middle East increased concerns about potential disruptions to energy supplies.

Higher oil prices could create another challenge for policymakers because a sustained increase in energy costs can feed into broader inflation. That could make it more difficult for the Federal Reserve to ease monetary policy even if other parts of the economy begin to weaken.

At 9:34 a.m. ET, the Dow Jones Industrial Average was up 394.74 points, or 0.74%, at 53,456.69. The S&P 500 gained 41.29 points, or 0.54%, to 7,707.89, while the Nasdaq Composite rose 160.20 points, or 0.61%, to 26,378.03.

Technology and software stocks were among the major market movers, although the performance of individual companies varied sharply.

Broadcom shares fell 5.26% after the semiconductor company issued a fourth-quarter revenue forecast that fell short of Wall Street’s already-high expectations. The decline highlighted the intense scrutiny facing companies benefiting from the rapid expansion of artificial intelligence infrastructure.

Investors have pushed AI-related stocks to elevated valuations in recent months, creating increasingly high expectations for revenue and earnings growth. Companies at the center of the AI investment boom therefore face little room for disappointing forecasts.

Snowflake provided a more positive signal for the software sector, with shares surging 25.17% after the company issued a strong annual revenue outlook. The gains helped lift other major software companies, with ServiceNow rising 5.43%, Salesforce gaining about 3.14% and Adobe climbing 3.62%.

Despite Thursday’s gains, investors remain cautious about the broader market outlook. Geopolitical tensions, uncertainty surrounding interest rates, elevated oil prices and limited earnings catalysts could make it difficult for stocks to sustain a strong upward move throughout September.

The possibility of increased market volatility is also drawing attention as investors prepare for the U.S. midterm elections and potentially thinner trading conditions during the month. Such conditions can amplify reactions to economic data, corporate earnings and political developments.

The S&P 500 has historically experienced some of its sharpest declines during September, adding to concerns that investors could face larger-than-usual swings in the weeks ahead.

Market breadth was positive in early trading Thursday, with advancing stocks outnumbering decliners by about 3.33 to 1 on the New York Stock Exchange and 2.36 to 1 on the Nasdaq.

The S&P 500 recorded nine new 52-week highs and two new lows, while the Nasdaq Composite registered 29 new highs and 28 new lows.

For investors, the combination of easing expectations for an immediate rate increase and stronger gains in several technology and software stocks provided a positive start to the session. But the market’s direction in the coming weeks is likely to remain closely tied to inflation data, labor-market conditions, oil prices and developments in the Middle East.

The Federal Reserve’s September decision could ultimately become one of the most important tests for markets this year, particularly if inflation remains above the central bank’s target while economic growth shows signs of slowing.