Stocks rose and bond yields declined on Thursday after Federal Reserve Governor Christopher Waller expressed willingness to support maintaining current interest rates if inflation pressures continue to show signs of easing. This statement led money markets to reduce their bets on a September Fed rate hike, with swap contracts now pricing in roughly even odds of a quarter-point increase, down from about a 70% chance earlier in the week. Short-dated Treasuries outperformed, and the S&P 500 climbed 1.1%, marking its largest gain in a month, driven by a rally in megacap stocks.
The dollar reached its lowest level since May, with the Bloomberg Dollar Spot Index falling 0.5%. Conversely, the Japanese yen jumped 1.9% against the dollar, reaching 155.74 per dollar, as traders increased wagers on Japanese rate increases and remained vigilant for potential intervention. Bitcoin's value also saw a significant surge, topping $80,000, rising 5.5% to $81,625.76, while Ether climbed 5% to $2,513.98.
Waller's decision on interest rates will be heavily influenced by August inflation data, due next week. Economists anticipate Friday's jobs report to show a 55,000 rise in payrolls for August, following an unexpected dip in July, with the unemployment rate expected to hold at 4.1%. Oil prices wavered amid these developments, with West Texas Intermediate crude rising 0.7% to $91.69 a barrel, while spot gold increased by 2.1% to $4,473.27 an ounce.
The market's reaction, including a 1.2% rise in the Nasdaq 100 and the Dow Jones Industrial Average, and a 1.2% gain in the MSCI World Index, reflects a more optimistic outlook regarding the Federal Reserve's stance on monetary policy. This sentiment was further supported by softer U.S. private jobs creation data, which came in below expectations, easing pressure on the Fed to hike borrowing costs. The yield on 10-year Treasuries was little changed at 4.77%, while the yield on 2-year Treasuries declined three basis points to 4.34%.
