Wall Street rallied on Thursday as investors curbed their rate hike bets after U.S. Federal Reserve Governor Christopher Waller said he would support holding the Fed funds target rate steady if data shows inflationary pressures are abating.
All three major U.S. stock indexes closed up by 1% or more, with the Nasdaq enjoying a boost from the "magnificent seven" group of AI-related megacap stocks. All three indexes were on track for weekly gains.
Fed Governor Christopher Waller told Reuters he would be inclined to let key interest rates stand should upcoming data confirm that price pressures are easing, but added he would support a rate hike if inflation fails to cool down.
Following Waller's remarks, financial markets moderated expectations for rate hikes at the Fed's September meeting, lowering the likelihood to 50.4% from 63.2% on Wednesday, according to CME's FedWatch tool.
The benchmark U.S. Treasury yield pulled back for the second straight session after touching its highest level since November 2023. Rate-hike expectations had spiked in recent sessions, as long-dated bond yields surged to the highest levels in years on a global bond selloff driven by fears of inflation, ballooning debt and geopolitical uncertainty.
"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, Billings, Montana.
"Underneath the broad market indices, we're seeing continued influence by those late reporters from the second-quarter earnings reporting season," Northey added. "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."
Thursday's economic reports were generally upbeat, with low jobless claims and an acceleration of the service sector. On the other hand, the data showed services input prices hit their highest level since October 2022, and the international trade gap widened by 24.4%.
On Friday, the Labor Department is due to release its August employment report, which is expected to show the U.S. economy added 56,000 jobs last month, holding the unemployment rate steady at 4.1%.
According to preliminary data, the S&P 500 .SPX gained 81.67 points, or 1.07%, to end at 7,748.27 points, while the Nasdaq Composite .IXIC gained 366.39 points, or 1.40%, to 26,584.21. The Dow Jones Industrial Average .DJI rose 627.37 points, or 1.18%, to 53,689.32.
NvidiaNVDA.O rose after the company said it would buy developer platform Hugging Face for $12.9 billion in a challenge to OpenAI and Anthropic.
But chipmaker Broadcom AVGO.O dropped following its weaker-than-expected fourth-quarter revenue forecast, a reminder that companies at the center of the AI buildout have a high bar to clear.
Snowflake SNOW.N soared after forecasting strong annual revenue, boosting sentiment across the software sector. ServiceNow NOW.N, Salesforce CRM.N and Adobe ADBE.O also rose on the day.
Crypto-linked stocks rose after bitcoin BTC= rebounded following two straight sessions of losses, with Strategy MSTR.O, Coinbase Global COIN.O and retail trading platform Robinhood Markets HOOD.O all enjoying sizeable gains.
Reuters
