Global stock markets rallied and bond yields declined following remarks from Federal Reserve Governor Christopher Waller, who indicated a willingness to keep interest rates steady if upcoming data confirms cooling inflation pressures. This caused market expectations for a rate hike at the Fed's mid-September meeting to drop significantly, with the likelihood now priced at roughly 50% compared to 63% previously, according to CME FedWatch. This dovish sentiment from the Fed provided a broad lift to markets.
In the U.S., the Dow Jones Industrial Average rose by 624.16 points (1.18%) to 53,686.11, the S&P 500 increased by 81.11 points (1.06%) to 7,747.71, and the Nasdaq Composite gained 366.23 points (1.40%) to 26,584.06. All three major U.S. stock indexes closed at least 1% higher, with the Nasdaq benefiting from strong performance by AI-related megacap stocks like Nvidia, which rose 1.8% after announcing a $12.9 billion acquisition of Hugging Face. Snowflake also jumped 16.6% after a strong revenue forecast, boosting the software sector. Meanwhile, the yield on the benchmark U.S. 10-year Treasury note fell 3.8 basis points to 4.756%, its biggest fall since August 25.
Globally, MSCI's gauge of stocks gained 1.04%, and European stocks also rose, breaking a three-session losing streak. The pan-European STOXX 600 was up 0.5%. However, chipmaker Broadcom saw its shares drop 2.7% after providing a weaker-than-expected fourth-quarter revenue forecast. The Japanese yen also strengthened significantly, gaining over 2% against the U.S. dollar, as traders increased bets on an interest rate hike by the Bank of Japan, with markets now pricing in a 75% chance of a 25-basis-point hike this month.
