Wall Street surged on Thursday after Federal Reserve governor Christopher Waller signalled he could support leaving interest rates unchanged this month if forthcoming data confirms that inflation is easing.
The remarks helped reverse a recent rise in expectations of a rate increase at the Federal Reserve’s September 15-16 meeting, sending all three major US stock indexes more than 1% higher by the close.
The S&P 500 gained 1.07%, or 81.67 points, to finish at 7,748.27. The Dow Jones Industrial Average rose 1.18%, adding 627.37 points to reach 53,689.32, while the technology-heavy Nasdaq Composite advanced 1.40% to 26,584.21.
Mr Waller said inflation remained above the Fed’s 2% target but that recent figures showed “some signs of disinflation”. If that improvement continued in the data due over the next two weeks, he said he would be inclined to support holding the federal funds rate at its current level.
He also left the door open to tighter policy, warning that a hotter-than-expected inflation reading could persuade him to back a rate increase. Market pricing put the probability of a September hike at about 50.4% after his comments, down from 63.2% on Wednesday, according to CME’s FedWatch tool.
US Treasury yields fell for a second consecutive session, offering further support to shares whose valuations are particularly sensitive to borrowing costs. The benchmark 10-year yield had recently climbed to its highest level since November 2023 amid concern over inflation, government borrowing and geopolitical uncertainty.
Technology and artificial intelligence stocks led much of the advance. Nvidia rose after announcing a $12.9 billion deal to acquire developer platform Hugging Face, while Snowflake jumped after issuing a strong annual revenue forecast. ServiceNow, Salesforce and Adobe also finished higher.
Broadcom moved in the opposite direction, falling after its fourth-quarter revenue forecast came in below expectations, underlining the high standards facing companies at the centre of the AI investment boom.
Investors also assessed a mixed set of economic indicators. Weekly jobless claims were low and the services sector accelerated, but input prices in services reached their highest level since October 2022 and the US trade deficit widened by 24.4%.
Attention now turns to the Labor Department’s August employment report, due on Friday, followed by the latest inflation figures before the Fed’s policy meeting. Economists expect the US economy to have added 56,000 jobs last month, with unemployment holding at 4.1%.
