Market surge on rate expectations
On Thursday, U.S. stocks surged as traders reduced their expectations for additional rate increases. This change came after Federal Reserve Governor Christopher Waller indicated he would likely keep the Fed funds target rate between 3.5% and 3.75% if forthcoming data shows inflation is moderating. He also mentioned he would back a rate hike if price pressures persist.[S1]
The three major U.S. stock indexes each climbed at least 1%. The Dow Jones Industrial Average advanced 624.16 points, or 1.18%, closing at 53,686.11. The S&P 500 gained 81.11 points, or 1.06%, to 7,747.71. The Nasdaq Composite rose 366.23 points, or 1.4%, to 26,584.06, helped by the "Magnificent Seven" AI-related megacap stocks. All three indexes were poised for weekly gains.[S1]
Bond yields and economic data
After Waller's comments, traders lowered the odds of a September rate hike to 50.4% from 63.2% the previous day, based on CME's FedWatch tool. The benchmark U.S. Treasury yield declined for a second session, retreating from its highest level since November 2023. Earlier, yields had spiked due to a global bond selloff driven by inflation worries, rising debt, and geopolitical tensions.[S1]
Thursday's economic data was mostly positive, with low jobless claims and faster service sector growth. However, services input costs reached their highest since October 2022, and the trade deficit expanded by 24.4%. The Labor Department will release its August employment report on Friday. Among S&P 500 sectors, consumer discretionary led gains, while energy lagged.[S1]
