US STOCKS-Wall Street ends sharply higher as Waller remarks ease rate hike fears

Wall Street rallied on Thursday as investors curbed their rate hike bets after U.S. 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 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.

Fed Governor Christopher Waller told Reuters he would be inclined to let key interest rates stand should upcoming data confirm 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. Rate-hike expectations had 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. "Commentary from Fed Governor Waller (is) providing a broad lift for markets writ large," said Bill Northey, senior investment director at U.S. 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." 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%.

On Friday, the Labor Department is due to release its August employment report, which is expected to show the ​U.S. economy added 56,000 jobs last month, holding the unemployment rate steady at 4.1%. The Dow Jones Industrial Average rose 624.16 points, or 1.18%, to 53,686.11, the S&P 500 gained 81.11 points, or ⁠1.06%, to 7,747.71 and the Nasdaq Composite gained 366.23 points, or 1.40%, 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% after the company said it ⁠would buy ​developer platform Hugging Face for $12.9 billion in a challenge to OpenAI and Anthropic.

But chipmaker Broadcom dropped 2.7% following its weaker-than-expected fourth-quarter revenue forecast, a reminder that companies at the center of the AI buildout have a high bar to clear. Snowflake jumped 16.6% after forecasting strong annual revenue, boosting sentiment across the software sector. ServiceNow, Salesforce and Adobe gained between 2.1% and 6.5% on the day.

Crypto-linked stocks rose after ⁠bitcoin rebounded following two straight sessions of losses, with Strategy jumping 17.6% and Coinbase Global surging 10.1%. Retail trading platform Robinhood Markets surged 16.6%. Advancing issues outnumbered decliners by a 1.98-to-1 ratio on the NYSE. There ⁠were 284 new highs and 186 new lows ⁠on the NYSE.

On the Nasdaq, 2,957 stocks rose and 1,771 fell as advancing issues outnumbered decliners by a 1.67-to-1 ratio. The S&P 500 posted 14 new 52-week highs and eight new lows while the Nasdaq Composite recorded 71 new highs and 116 new lows.

Volume on U.S. exchanges was 15.25 billion shares, ‌compared with the 15.09 billion average for ‌the full session over the last 20 trading days.