US Stocks Surge as Fed's Waller Hints at Rate Pause
Major US stock indexes climbed over 1% on Thursday after Federal Reserve Governor Christopher Waller cited encouraging inflation data, leading traders to
US stocks surged on Thursday, with the Dow Jones Industrial Average climbing 1.2% and the Nasdaq Composite jumping nearly 1.4%. The rally was sparked by comments from Federal Reserve Governor Christopher Waller, who said recent inflation data showed promising signs of improvement, leading traders to pare back expectations for an imminent rate increase.
According to Yahoo Finance, Waller shared his optimistic view at a Reuters event, noting that three-month inflation readings have fallen steadily from 4.76% in February. He called the speed of this downward trajectory "encouraging," though he acknowledged inflation remains above the Fed's 2% target. "If this continues in the data due over the next two weeks, I would be inclined to support holding the target for the federal funds rate at its current setting," Waller said.
Market Reaction and Rate Bets
The immediate market reaction was sharp. Following Waller's remarks, traders rapidly scaled back their bets on a September rate hike. The probability of an increase fell to roughly a tossup, down from a 63% chance the day before, as tracked by the CME's FedWatch tool. Bond yields eased in response, with the yield on the 10-year Treasury note declining 5 basis points to 4.74%.
Major index performances for the session were as follows:
| Index | Performance |
|---|---|
| Dow Jones Industrial Average (^DJI) | +1.2% |
| S&P 500 (^GSPC) | +1.0% |
| Nasdaq Composite (^IXIC) | +1.4% |
Corporate Moves and Earnings
Individual stocks also saw significant movement. Nvidia stock rose 1% after the AI chipmaker announced a deal to acquire open AI platform Hugging Face for roughly $13 billion; the transaction is expected to close in 2027. In a separate surge, shares of Elon Musk's companies rallied. Tesla stock popped 7% ahead of its Cybercab event, while shares of SpaceX also gained over 7% amid a broader tech rally and bullish analyst commentary.
On the earnings front, Lululemon Athletica and DocuSign were among the companies scheduled to report quarterly results after the market closed. Broadcom stock slipped despite the chipmaker posting an earnings beat, as the results failed to lift its shares.
Economic Data and Labor Market
Attention also turned to economic data releases setting the stage for Friday's key jobs report. Initial jobless claims for the week ending Aug. 29 ticked up to 206,000, coming in slightly above economist estimates. Outplacement firm Challenger, Gray & Christmas reported a slower pace of layoff announcements in August, which the source described as the latest sign of a "low hire, low fire" labor market.
ADP chief economist Nela Richardson told reporters this points to a labor market that is "cooling, not cracking." Separately, data from the Institute for Supply Management showed the US services sector expanded in August by the most in six months, with its headline index rising to 55.4.
Broader Market Influences
Other assets reacted to the shifting rate expectations. Bitcoin jumped 4% to top $80,000 as Treasury yields eased and the dollar weakened. Oil prices remained a focus, with Brent crude futures holding above $95 per barrel amid geopolitical tensions. The report noted President Trump said the US carried out a "very heavy attack" against Iran but stated the action wouldn't take "too long."
