U.S. stocks climbed more than 1% Thursday after Federal Reserve Gov. Christopher Waller signaled support for holding interest rates steady if inflation continues to ease, prompting traders to sharply reduce expectations for a September rate increase.
By yourNEWS Media Newsroom
Wall Street rallied sharply Thursday after Federal Reserve Gov. Christopher Waller indicated he could support leaving interest rates unchanged this month if incoming data confirm that inflationary pressures are easing.
All three major U.S. stock indexes finished at least 1% higher, putting them on track for weekly gains as investors scaled back expectations that the Federal Reserve will raise rates at its Sept. 15-16 policy meeting.
The S&P 500 rose 81.67 points, or 1.07%, to close at 7,748.27, according to preliminary data. The Nasdaq Composite advanced 366.39 points, or 1.40%, to 26,584.21, while the Dow Jones Industrial Average gained 627.37 points, or 1.18%, to finish at 53,689.32.
Waller told Reuters that he would be inclined to keep the federal funds target rate unchanged if economic reports over the coming days show inflation continuing to moderate. He also said he would support another rate increase if price pressures fail to cool.
Investors quickly adjusted their expectations following his remarks.
The probability of a rate hike at the Fed’s September meeting fell to 50.4% from 63.2% Wednesday, according to CME’s FedWatch Tool.
“Commentary from Fed Governor Waller (is) providing a broad lift for markets writ large,” said Bill Northey, senior investment director at U.S. Bank Wealth Management in Billings, Montana.
Treasury markets also responded, with the benchmark U.S. yield declining for a second consecutive session after previously reaching its highest level since November 2023.
Rate-hike expectations had risen substantially in preceding sessions as a global bond selloff drove longer-term yields to multiyear highs amid concerns about persistent inflation, expanding government debt and geopolitical uncertainty.
Thursday’s market advance was broad, but the technology-heavy Nasdaq received additional support from several of the megacap technology companies commonly grouped as the “Magnificent Seven.”
Nvidia rose after announcing that it would acquire developer platform Hugging Face for $12.9 billion, a transaction positioning the semiconductor company to compete more directly with OpenAI and Anthropic in the artificial intelligence market.
Other parts of the technology sector produced more mixed results.
Broadcom declined after issuing a fourth-quarter revenue forecast that fell short of expectations, underscoring the increasingly high financial expectations facing companies at the center of the artificial intelligence investment boom.
Software stocks strengthened after Snowflake issued an upbeat annual revenue forecast.
ServiceNow, Salesforce and Adobe also advanced during Thursday’s session.
“Underneath the broad market indices, we’re seeing continued influence by those late reporters from the second-quarter earnings reporting season,” Northey said. “And that’s driving some differentiation between spaces like semiconductors, where we had a high-profile report yesterday afternoon, and also within the software space, where we’ve seen some differential results, meeting or exceeding somewhat lower bar standards.”
Cryptocurrency-related equities also rallied after bitcoin recovered following two consecutive sessions of losses.
Strategy, Coinbase Global and retail brokerage platform Robinhood Markets were among the companies posting sizable gains.
Investors were simultaneously evaluating a group of economic reports released Thursday that provided a mixed but generally positive picture of current business conditions.
Initial unemployment claims remained low, while activity in the U.S. services sector accelerated.
At the same time, prices paid by service-sector businesses reached their highest level since October 2022, an indication that inflationary pressures have not entirely disappeared.
The U.S. international trade deficit also widened by 24.4%.
Those competing signals have heightened attention on Friday’s August employment report from the Labor Department, which could significantly influence expectations for the Federal Reserve’s September decision.
Economists expect the report to show that the U.S. economy added approximately 56,000 jobs in August while the unemployment rate remained unchanged at 4.1%.
A stronger-than-anticipated report could revive expectations for a September rate increase by suggesting the economy remains capable of absorbing tighter monetary policy.
A weaker reading, particularly if accompanied by further signs of cooling inflation, could strengthen the argument for keeping rates unchanged.
Thursday’s rally marked a reversal from the heightened rate fears that had driven bond yields upward in preceding sessions.
With Waller leaving open both possibilities — holding rates steady if inflation continues to moderate or supporting an increase if it does not — investors now turn to Friday’s employment figures and subsequent inflation reports for clearer evidence of which path the Federal Reserve is most likely to take.
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