One Fed governor shifts the rate bets
Wall Street has rallied as investors curbed their rate hike bets after US 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 US stock indices closed at least 1.0 per cent higher, with the Nasdaq enjoying a boost from the "Magnificent Seven" group of AI-related megacap stocks.
All three indices were on track for weekly gains.
Waller told Reuters he would be inclined to let key interest rates stand should upcoming data confirm that price pressures are easing. He 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 per cent from 63.2 per cent on Wednesday, according to CME’s FedWatch tool.
Bond yields ease back from multi-year highs
The benchmark US 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 sell-off 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 US 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."
A jobs report waits at the end of the week
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 per cent.
On Friday, the Labor Department is due to release its August employment report, which is expected to show the US economy added 56,000 jobs last month, holding the unemployment rate steady at 4.1 per cent.
Chipmakers split while software and crypto run
The Dow Jones Industrial Average rose 624.16 points, or 1.18 per cent, to 53,686.11, the S&P 500 gained 81.11 points, or 1.06 per cent, to 7,747.71 and the Nasdaq Composite gained 366.23 points, or 1.40 per cent, to 26,584.06.
Of the 11 major sectors in the S&P 500, consumer discretionary was the largest percentage gainer while energy stocks were the laggards.
Nvidia rose 1.8 per cent after the company said it would buy developer platform Hugging Face for $US12.9 billion ($A17.9 billion) in a challenge to OpenAI and Anthropic.
