US stocks rise on hopes Fed will leave rates unchanged

U.S. stocks experienced a significant rally on Thursday, as investors tempered their expectations of interest rate hikes following comments from Federal Reserve Governor Christopher Waller. Waller suggested he would be open to maintaining key interest rates steady, should data indicate that inflationary pressures are easing. As a result, Wall Street's major indexes saw at least a 1% increase, with the Nasdaq benefiting from gains in AI-related megacap stocks known as the "Magnificent Seven."

The Federal Reserve's market outlook was modified by Waller's remarks, with the likelihood of a rate hike at the upcoming September meeting dropping to 50.4% from 63.2% the previous day, according to CME's FedWatch tool. The benchmark U.S. Treasury yield experienced a decline for the second consecutive day, after peaking at its highest level since November 2023. This price movement reflected a global bond sell-off driven by concerns over inflation, mounting debt, and geopolitical uncertainties.

Investment professionals attributed the broad market boost to Waller's remarks, which are providing a sense of reassurance for investors. While the broader market indices benefited, individual sectors continued to show differentiation. Notably, the semiconductor industry saw strong results from a recent earnings report, while the software sector displayed mixed outcomes.

Economic reports on Thursday were generally positive, highlighting low jobless claims and an acceleration in the service sector. However, services input prices hit the highest level since October 2022, and the international trade gap widened by 24.4%. On Friday, the Labor Department is set to release its August employment report, which is expected to show the U.S. economy added 56,000 jobs last month, keeping the unemployment rate steady at 4.1%.

For the week, the S&P 500 gained 1.1%, reaching 7,478; the Dow Jones Industrial Average rose 1.2%, closing at 53,686; and the Nasdaq climbed 1.4%, closing at 26,584. The reporting and analysis were conducted by Robert Kemp.