Wall Street saw a significant rally on September 3rd, with major US stock indexes closing over 1% higher. This surge was primarily driven by investors dialing back their expectations for an interest rate hike at the Federal Reserve's upcoming September meeting. Federal Reserve Governor Christopher Waller indicated he would support maintaining current interest rates if upcoming data shows inflation is easing, though he reserved the right to support a hike if inflation fails to cool. Following Waller's remarks, the likelihood of a rate hike at the September meeting dropped to 50.4% from 63.2% the previous day, according to CME's FedWatch tool.
The benchmark US Treasury yield also retreated for the second consecutive session, pulling back from levels not seen since November 2023. This movement was a reversal of a recent global bond selloff, which had pushed long-dated bond yields to multi-year highs amidst fears of inflation, increasing debt, and geopolitical instability. New York Fed President John Williams also contributed to the positive sentiment by calling recent inflation data "encouraging" and attributing the spike in yields to the economy's strength.
Economic data released on September 3rd presented a mixed picture. Jobless claims were low, and the service sector accelerated. However, services input prices reached their highest point since October 2022, and the international trade gap widened by 24.4%. Investors are now eagerly awaiting the August jobs report, scheduled for release on September 4th, which is expected to show the US economy added 56,000 jobs last month, with the unemployment rate remaining steady at 4.1%.
The Dow Jones Industrial Average rose by 624.16 points, or 1.18%, to 53,686.11. The S&P 500 gained 81.11 points, or 1.06%, reaching 7,747.71, and the Nasdaq Composite climbed 366.23 points, or 1.4%, to 26,584.06. All three major indexes were on track for weekly gains. Technology and growth stocks, particularly those in the AI sector, performed strongly. Nvidia rose 1.8% after announcing its nearly $13 billion acquisition of Hugging Face, an AI developer platform. Snowflake jumped 16.6% after forecasting strong annual revenue, buoyed by the success of its AI-coding agent Cortex Code.
