US stocks closed sharply higher on Thursday, with the Dow Jones Industrial Average posting its best session since early August, as investors pared back expectations for a Federal Reserve interest rate hike this month. The move followed comments from Fed Governor Christopher Waller suggesting he would favor keeping rates unchanged if upcoming data confirms easing inflation pressures.
Broad market rally led by Dow
The Dow climbed 627.37 points, or 1.18%, to settle at 53,689.32. The S&P 500 advanced 81.67 points, or 1.07%, to 7,748.27, while the Nasdaq Composite jumped 366.39 points, or 1.4%, to 26,584.21. The benchmark 10-year Treasury yield pulled back to around 4.77%, retreating from its highest level since November 2023 reached a day earlier.
According to the CME FedWatch tool, fed funds futures traders lowered the probability of a September rate hike to 50.4% from 63.2% the prior day. The yield pullback occurred even as oil prices remained elevated, with West Texas Intermediate crude trading above $91 a barrel and Brent crude above $95. Higher energy costs have recently stoked inflation concerns and fueled speculation about tighter monetary policy.
The Japanese yen strengthened sharply against the dollar, gaining about 2% to 155.51 yen, which contributed to the decline in Treasury yields. The dollar's weakness and falling yields provided a tailwind for equities.
AI and tech stocks lead gains
Technology and AI-related names were at the forefront of the rally. Nvidia shares rose after the company announced a $12.9 billion agreement to acquire developer platform Hugging Face, marking its second-largest acquisition and expanding its AI ecosystem footprint. Snowflake surged more than 20% after reporting better-than-expected second-quarter earnings and revenue, along with strong guidance. ServiceNow, Salesforce, and Adobe also closed higher, boosting the software sector.
Broadcom, however, fell 2% after its quarterly results included a weaker-than-expected revenue forecast for the fiscal fourth quarter, highlighting divergent reactions among companies tied to the AI investment cycle. The major indexes were on track for weekly gains, with the Nasdaq also benefiting from strength in the so-called Magnificent Seven megacap tech stocks.
Jobs report and inflation watch
Investors now turn to Friday's US employment report for further clues on the Fed's policy path. Economists expect the Labor Department to report that the economy added 56,000 jobs in August, with the unemployment rate holding at 4.1%. Thursday's economic data was mostly positive: jobless claims remained low and services sector activity accelerated, though services input prices hit their highest level since October 2022 and the international trade gap widened 24.4%.
Oil prices remain a potential source of inflation pressure, and elevated crude levels could keep inflation sticky, limiting the Fed's ability to ease policy. Crypto-linked stocks also advanced as Bitcoin rebounded after two sessions of losses, with Strategy, Coinbase Global, and Robinhood Markets posting sizeable gains.
For more on market moves, see our coverage of stocks shrugging off oil and Fed worries and the AI rally offsetting yield spikes.
This article is for informational purposes only and does not constitute financial advice.
