Wall Street's main indexes opened higher following comments from Federal Reserve Governor Christopher Waller, who indicated he would support holding interest rates steady at the central bank's September meeting if upcoming inflation data confirms cooling price pressures. This announcement led to a sharp drop in market-implied odds for a rate hike, with traders now pricing in just a 48.4% probability, down about 15 percentage points from Wednesday, according to the CME Group's FedWatch gauge. Waller emphasized, "Give disinflation a chance. We can wait one meeting," and stated that a 25 basis point hike now wouldn't bring CPI down to 2%.
Waller's decision on monetary policy will be heavily influenced by August inflation data. If there is continued progress toward the 2% goal, he is willing to support maintaining the current policy rate. However, he cautioned that if inflation data shows price pressures persisting or reversing, borrowing costs may need to rise, implying a potential rate hike. The Fed Governor noted that while inflation remains significantly above the 2% goal, recent data suggests some signs of disinflation, with three-month core inflation falling steadily from 4.76% in February to 3.05% through July.
In response to Waller's dovish lean, the Dow Jones Industrial Average rose 0.74% to 53,456.69, the S&P 500 gained 0.54% to 7,707.89, and the Nasdaq Composite gained 0.61% to 26,378.03. Broadcom fell 5.26% after its fourth-quarter revenue forecast disappointed, while Snowflake soared 25.17% on strong annual revenue projections, boosting the software sector. ServiceNow rose 5.43%, and Salesforce and Adobe gained about 3.14% and 3.62%, respectively. Geopolitical risks, such as a prolonged conflict in the Middle East and rising Brent crude futures (up 0.49%), still pose potential inflationary headaches, and investors are looking to Friday's jobs data for further guidance.
