Wall Street got the reprieve it was looking for on Thursday, and it came from an unlikely messenger.
Federal Reserve Governor Christopher Waller, speaking at a Reuters NEXT Newsmaker event in Washington, said he is prepared to hold the policy rate at its current 3.50 to 3.75 percent range at the September 15-16 meeting, provided the August inflation data cooperates. Stocks rose, Treasury yields fell, and futures traders trimmed their bets on a rate increase, ending a losing streak that had dragged on since late last week.
What Waller Said
Waller did not rule out a hike. He was explicit that his vote hinges on one number. "My decision on the appropriate stance of policy will be heavily influenced by what we learn about August inflation," he said. "If there is continued progress toward our 2% goal, then I am willing to support holding the policy rate at its current level."
Then came the line that traders will remember. "I'm going to paraphrase John Lennon here. Give disinflation a chance. We can wait one meeting."
The caveats were real. Waller said the current policy rate is "only slightly restricting aggregate demand," and that "it may not take much acceleration in inflation to nudge me into supporting tighter policy." He also said he no longer views tariffs or elevated energy prices as a significant source of ongoing inflation pressure, arguing that the import-tax pass-through has largely run its course and that higher energy prices tied to the Middle East conflict do not appear to be bleeding into other prices.
Market-implied odds of a September hike fell to 54.6 percent after his remarks, down roughly 12 percentage points, according to the CME Group's FedWatch tool. Forbes had put the figure at 66 percent as recently as Monday.
The Market Reaction
In Thursday trading, the Dow Jones Industrial Average rose 283.22 points, or 0.53 percent, to 53,345.17. The S&P 500 gained 30.64 points, or 0.40 percent, to 7,697.24. The Nasdaq Composite added 166.32 points, or 0.63 percent, to 26,384.15. The Russell 2000 climbed 0.43 percent.
The 10-year Treasury yield slipped four basis points to 4.74 percent, retreating from the three-year high above 4.8 percent set on Wednesday. Gold jumped 2.18 percent to $4,511 an ounce as the rate-hike premium came out of the dollar trade. West Texas Intermediate crude rose 1.2 percent to $92.10 a barrel, and Brent held above $95, after President Trump said any renewed strikes on Iran would be "brief." The VIX eased to 15.04.
Nvidia Buys Hugging Face, Broadcom Guides Light
Tech supplied the other half of the story. Nvidia agreed to acquire open-source AI platform Hugging Face for $12.9 billion, its second-largest deal on record after the $20 billion purchase of Groq's assets in December. CEO Jensen Huang said in a blog post that the company "will expand access to AI for developers and institutions worldwide," and Nvidia said it would keep the platform open. The deal is expected to close in 2027. Nvidia shares rose about 1 percent.
Broadcom was the day's disappointment. Fiscal third-quarter revenue rose 86 percent to $29.59 billion, ahead of the $29.36 billion consensus, and adjusted earnings of $3.32 a share beat the $3.24 estimate. Semiconductor revenue more than tripled to $16.7 billion. But fourth-quarter revenue guidance of $34.8 billion fell short of the $35.03 billion analysts wanted, and the shares dropped 5 percent in extended trading Wednesday. Snowflake moved the other way, soaring on AI-driven results.
Friday's Jobs Report Looms
Initial jobless claims came in at 206,000 for the week, against a 205,000 consensus and a prior reading of 203,000. Challenger, Gray & Christmas reported 53,000 announced job cuts in August, down 46.1 percent from a year earlier and the slowest August since 2022.
That sets up Friday's payrolls report at 8:30 a.m. Eastern. Consensus calls for roughly 55,000 to 58,000 jobs added in August, a rebound from July's surprise loss of 23,000, with unemployment holding at 4.1 percent, according to Kiplinger and Morningstar. A weak print would reinforce Waller's case for patience. A hot wage number, followed by a firm CPI next week, would put the hike right back on the table.
Sources: Reuters (Waller remarks at Reuters NEXT, via Yahoo Finance), CNBC (Waller, Broadcom earnings, Nvidia-Hugging Face, CME FedWatch), Yahoo Finance (index levels, yields, commodities, jobless claims, Challenger), Bloomberg (Nvidia-Hugging Face), Forbes (FedWatch 66 percent, Aug. 31), Kiplinger and Morningstar (August jobs report consensus)