US stocks rallied on Thursday as investors reduced expectations for a Federal Reserve rate hike this month following comments from Fed Governor Christopher Waller.
The Dow Jones Industrial Average rose 1.18%, while the S&P 500 and Nasdaq Composite also gained more than 1%.
Dow leads broad market rally as rate bets fall
The Dow climbed 627.37 points, or 1.18%, to close at 53,689.32, marking its best session since Aug. 4.
The S&P 500 gained 81.67 points, or 1.07%, to 7,748.27, while the Nasdaq Composite advanced 366.39 points, or 1.4%, to 26,584.21.
The benchmark 10-year Treasury yield pulled back to around 4.77% after reaching its highest level since November 2023 on Wednesday.
The decline came as Waller indicated that he would favor keeping interest rates unchanged if upcoming data confirms that inflation pressures are easing.
Fed funds futures traders subsequently lowered the probability of a rate hike at the Federal Reserve’s September meeting to 50.4%, from 63.2% a day earlier, according to the CME FedWatch tool.
The pullback in yields came despite elevated oil prices.
West Texas Intermediate crude traded above $91 a barrel, while Brent crude remained above $95. Higher energy prices have recently contributed to concerns about inflation and the possibility of tighter monetary policy.
The Japanese yen also strengthened sharply against the US dollar, gaining about 2% to 155.51 yen. The yen’s rise contributed to broader declines in Treasury yields.
AI stocks drive gains as Nvidia and Snowflake rally
Technology and AI-related stocks helped support the broader market advance. Nvidia shares rose after the company announced a $12.9 billion agreement to acquire developer platform Hugging Face.
The deal represents Nvidia’s second-largest acquisition and expands its presence across the AI ecosystem.
Meanwhile, Snowflake shares surged more than 20% after the company reported better-than-expected second-quarter earnings and revenue and issued strong guidance.
ServiceNow, Salesforce and Adobe also ended higher, adding to gains across the software sector.
Broadcom moved in the opposite direction, falling 2% after its latest quarterly results included a weaker-than-expected revenue forecast for the fiscal fourth quarter.
The decline highlighted the differing reactions among companies linked to the ongoing AI investment cycle.
The major indexes were on track for weekly gains following Thursday’s advance. The Nasdaq also benefited from gains among the so-called Magnificent Seven group of megacap technology stocks.
Jobs report next as investors watch inflation
Investors are now turning their attention to Friday’s US employment report for further clues about the Federal Reserve’s policy path.
The Labor Department is expected to report that the US economy added 56,000 jobs in August, with the unemployment rate holding at 4.1%.
Thursday’s economic data was generally positive, with jobless claims remaining low and activity in the services sector accelerating.
However, services input prices reached their highest level since October 2022, while the international trade gap widened 24.4%.
Oil prices remained another potential source of inflation pressure.
Elevated crude prices have contributed to concerns that inflation could remain persistent and limit the Federal Reserve’s ability to ease monetary policy.
Crypto-linked stocks also advanced as Bitcoin rebounded after two sessions of losses. Strategy, Coinbase Global and Robinhood Markets posted sizeable gains alongside the broader recovery in digital assets.