- Lead. US equities recorded their strongest single session since August 4 on Thursday, with the Dow adding 635 points and the S&P 500 gaining 1 percent, after Federal Reserve Governor Christopher Waller signalled openness to holding rates at the September meeting.
- Fact. The market-implied probability of a Fed rate hike at the September 16–17 FOMC meeting fell from 63.2 percent before Waller’s remarks to 50.4 percent afterward, according to CME FedWatch data; the 10-year Treasury yield pulled back to around 4.75 percent from a session high of 4.818 percent.
- Stake. Friday’s August nonfarm payrolls report — due at 8:30 AM ET — is now the deciding variable: a weak print consolidates a hold, while a surprise above 100,000 jobs could push the three hawkish FOMC dissenters back toward majority territory before the meeting.
US stock markets opened sharply higher Thursday after Federal Reserve Governor Christopher Waller, in remarks that moved swiftly through trading desks, said he would be willing to support holding the policy rate steady at its current 3.50–3.75 percent range if incoming inflation data showed continued progress toward the 2 percent target. The Dow Jones Industrial Average rose 635 points, or 1.2 percent, the S&P 500 added 1.06 percent and the Nasdaq Composite climbed 1.3 percent — the indices’ best collective session in a month and a sharp reversal from the prior two days of pressure driven by elevated oil prices and rising yields.
What Waller Said
Speaking publicly on Thursday, Waller stated: “If there is continued progress toward our 2 percent goal, then I am willing to support holding the policy rate at its current level.” The language was notably more conditional than earlier remarks that had emphasised inflation risks, and markets read it as a tilt away from the three FOMC dissenters — governors who had favoured a 25 basis-point hike at the July meeting — without fully foreclosing a September move. Yahoo Finance reported that rate-hike bets fell immediately upon the comment, with CME FedWatch showing September probabilities dropping from 63.2 percent to 50.4 percent within the session. The shift stood in contrast to the trajectory described after Fed Chair Kevin Warsh’s hawkish Jackson Hole debut, which had doubled September hike expectations at the end of August.
Yields and the Credit Catalyst
The bond market move was equally significant. The 10-year Treasury yield, which had hit 4.818 percent on Wednesday — its highest level since November 2023 — retreated to approximately 4.75 percent during Thursday’s session as Waller’s remarks reduced the near-term hike premium. Lower yields benefited rate-sensitive sectors including utilities, real estate investment trusts and technology, amplifying the equity gain. Bitcoin also climbed during the session, reaching $80,924, as lower expected rates eased pressure on risk assets more broadly. The pattern suggests that the market’s current equity valuations are partly anchored to the assumption that the Fed will pause in September, making Friday’s August payrolls data — and next week’s August CPI — the critical tests of that assumption.
What Comes Next
September 4’s Bureau of Labor Statistics nonfarm payrolls release at 8:30 AM ET is the last major employment input before the FOMC convenes. Consensus projects 53,000 new jobs in August — above July’s 23,000 contraction but well below any reading that would alarm on the upside. If the figure arrives in line with or below expectations and Waller’s colleagues hold their tone, Tuesday’s August CPI release becomes the decisive final test. A number above 3.5 percent on core CPI — the Fed’s preferred measure has been running at 3.7 percent — would likely resurrect hawk-dominated rhetoric heading into the meeting. Markets are effectively pricing a fifty-fifty decision, and the next 96 hours will determine which way it resolves.