Wall St. ends higher as Waller's remarks ease rate hike fears

NEW YORK — Wall Street rallied Thursday as investors curbed their rate hike bets after U.S. Federal Reserve board member Christopher Waller said he would support holding the Fed funds target rate steady if data shows inflationary pressures are abating.

All three major U.S. stock indexes closed at least 1% higher, with the Nasdaq enjoying a boost from the "Magnificent Seven" group of AI-related megacap stocks. All three indexes were on track for weekly gains.

The Dow Jones Industrial Average jumped 624.16 points, or 1.18%, to 53,686.11. The S&P 500 rose 81.11 points, or 1.06%, to 7,747.71. The Nasdaq Composite soared 366.23 points, or 1.4%, to 26,584.06.

Waller told Reuters he would be inclined to let key interest rates stand in the 3.5%-3.75% range if upcoming data confirms that price pressures are easing, but 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% from 63.2% on Wednesday, according to CME's FedWatch tool.

The benchmark U.S. Treasury yield pulled back for the second straight session after touching its highest level since November 2023. Ratehike expectations spiked in recent sessions, as long-dated bond yields surged to the highest levels in years on a global bond selloff driven by fears of inflation, ballooning debt and geopolitical uncertainty.

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%.

The Labor Department is due to release its August employment report Friday.

Of the 11 major sectors in the S&P 500, consumer discretionary was the largest percentage gainer, while energy stocks were the laggards.

— Reuters