Dow Surges 627 Points, Nasdaq Jumps 1.4% as Fed's Waller Signals Support for September Rate-Hold

Mumbai, Sept 2: US stock markets closed sharply higher on Thursday, with all three major indices advancing more than 1% after Federal Reserve Governor Christopher Waller signalled his inclination to keep interest rates unchanged at the central bank’s September meeting if inflation data continues to show improvement. The rally marked the best single-day performance for the Dow Jones Industrial Average since 4 August, as easing rate-hike fears and declining Treasury yields lifted investor sentiment across the board. The S&P 500 gained 1.06% to close at 7,747.71, while the Nasdaq Composite surged 1.40% to 26,584.06. The Dow Jones Industrial Average climbed 627.37 points, or 1.18%, to settle at 53,689.32. 

Dow Jones Industrial Average Surges 627 Points, Marks Best Session Since Early August 

The Dow Jones Industrial Average (^DJI) delivered its strongest performance since 4 August, closing at 53,689.32 with a gain of 627.37 points, or 1.18%. The index opened the session at 53,309.17 and traded within a daily range of 53,286.15 to 53,746.50. The previous close stood at 53,061.95. All but two of the 30 components ended in positive territory. Goldman Sachs led the gainers, rising 3.34%, followed by Travelers which advanced 2.23%, Microsoft which gained 2.68%, and Walmart which rose 2.20%. JPMorgan Chase added 1.64%, while IBM climbed 1.30% and Caterpillar gained 0.99%. The advance was broad‑based, with financial and industrial sectors providing the lion’s share of the lift. 

S&P 500 Advances 1.06% as 10 of 11 Sectors Close in Green 

The S&P 500 (^GSPC) posted its best daily performance since early August, closing at 7,747.71 with a gain of 81.11 points, or 1.06%. The index opened at 7,686.71 and touched an intraday high of 7,756.76 before settling near the top of its range. The previous close stood at 7,666.60. Ten of the 11 primary S&P 500 sectors ended in positive territory. Materials led the gains, rising 1.54%, followed by Consumer Discretionary which advanced 1.9%, and Communication Services which gained 1.16%. Information Technology added 0.33%, while Energy rose 0.32%. Real Estate was the sole sector in the red, declining 0.79% as rising long‑term yields continued to pressure property trusts. 

Nasdaq Composite Jumps 1.40% on Tech Sector Rebound 

The technology‑heavy Nasdaq Composite (^IXIC) outperformed the other major indices, closing at 26,584.06 with a gain of 366.23 points, or 1.40%. The index opened at 26,336.32 and traded within a range of 26,325.06 to 26,644.57. The previous close stood at 26,217.83. The rebound was fuelled by a broad recovery in large‑cap technology and communication services names, which had been under pressure earlier in the week due to rising bond yields. The Nasdaq’s advance outpaced the other major indices, reflecting its higher sensitivity to interest‑rate expectations. 

Russell 2000 Rallies 0.51% as Small‑Caps Join Broad-Based Advance 

The Russell 2000 Index (^RUT) closed at 2,968.28, adding 15.11 points, or 0.51%. The index opened at 2,968.21 and traded within a range of 2,951.29 to 2,976.62. The previous close stood at 2,953.17. Small‑caps outperformed their large‑cap peers on a relative basis, with airlines, gold and silver miners, and regional banks among the strongest performing sub‑groups, benefiting from a weaker dollar and lower Treasury yields. 

S&P 100 Advances 1.13% on Blue‑Chip Strength 

The S&P 100 Index (OEX) closed at 3,844.94, rising 42.98 points, or 1.13%. The index opened at 3,813.05 and touched an intraday high of 3,852.23 and a low of 3,813.05. The previous close stood at 3,801.96. The move was driven by the same dovish Fed commentary that buoyed the broader market, with blue‑chip industrials and financials leading the advance. 

Also Read: How to invest in US stocks

Dow Jones Composite, Transportation and Utility Averages All Finish Higher 

The Dow Jones Composite Average (DJC) closed at 16,806.41, advancing 173.21 points, or 1.04%. It opened at 16,699.47 and traded between 16,667.35 and 16,817.46. The previous close stood at 16,633.20. 

The Dow Jones Transportation Average (DJT) closed at 20,861.52, rising 148.04 points, or 0.71%. The index opened at 20,780.33 and saw a session range of 20,550.13 to 20,898.52. The previous close stood at 20,713.48. Transport stocks benefited from lower oil prices earlier in the session, though crude later recovered. 

The Dow Jones Utility Average (DJU) closed at 1,085.59, gaining 10.11 points, or 0.94%. It opened at 1,076.95 and traded between 1,076.95 and 1,087.82. The previous close stood at 1,075.48. Utilities, often seen as bond proxies, rallied as the 10‑year Treasury yield pulled back from its recent highs. 

Philadelphia Semiconductor Index Edges Higher Despite Sector Headwinds 

The PHLX Semiconductor Sector Index (SOX) closed at 11,352.13, edging up 12.88 points, or 0.11%. The index opened at 11,219.44 and traded within a range of 11,056.38 to 11,371.33. The previous close stood at 11,339.25. The semiconductor sector underperformed the broader market, as investor caution over valuation and near‑term demand continued to weigh on chipmakers, even as the overall market rallied. 

NYSE Composite Advances 0.92%; S&P MidCap 400 and SmallCap 600 Both Post Gains 

The NYSE Composite Index (NYA) closed at 24,719.70, rising 224.15 points, or 0.92%. The index opened at 24,495.55 and touched an intraday high of 24,725.47 and a low of 24,495.55. The previous close stood at 24,495.55, reflecting a broad improvement across listed stocks. 

The S&P 400 MidCap Index (SP400) closed at 3,779.85, advancing 33.41 points, or 0.89%. It opened at 3,746.44 and traded between 3,743.32 and 3,780.01. The previous close stood at 3,746.44. 

The S&P 600 SmallCap Index (SP600) closed at 1,758.67, gaining 7.17 points, or 0.41%. It opened at 1,757.40 and saw a session range of 1,748.25 to 1,764.46. The previous close stood at 1,751.50. Both mid‑ and small‑cap indices benefited from the same macro drivers, though small‑caps lagged slightly as energy and regional bank volatility remained elevated. 

Waller’s Dovish Remarks Spark Relief Rally, Rate-Hike Odds Plunge to 50.4% 

Federal Reserve Governor Christopher Waller provided the primary catalyst for Thursday’s rally during a Reuters NEXT Newsmaker Interview in Washington. Waller stated that he would support holding the federal funds rate at 3.50%-3.75% at the 15‑16 September policy meeting if incoming data continues to show disinflation. He emphasised that his vote would be “heavily influenced” by the August Consumer Price Index report, scheduled for release on 11 September. 

“If this continues in the data due over the next two weeks, I would be inclined to support holding the target for the federal funds rate at its current setting,” Waller said. However, he warned that “if inflation comes in hot, I would consider a rate hike” at the September meeting. 

Waller’s comments contrasted sharply with Fed Chair Kevin Warsh’s hawkish message at Jackson Hole on 28 August, when Warsh suggested rates could need to rise if underlying inflation did not show further improvement. Following Waller’s remarks, financial markets rapidly moderated expectations for rate hikes at the September meeting, lowering the probability to 50.4% from 63.2% on Wednesday, according to CME’s FedWatch tool. 

Treasury Yields Retreat as Bond Sell-Off Slows Across the Curve 

Treasury yields moved lower across the curve on Thursday in response to Waller’s dovish remarks. The benchmark 10-year Treasury note yield fell more than 2 basis points to 4.768%. The shorter 2-year Treasury note yield, which tracks short‑term Federal Reserve interest rate decisions, dropped more than 2 basis points to 4.361%. The longer‑dated 30-year Treasury yield declined 2 basis points to 5.243%. 

The pullback came after the 10‑year yield had touched its highest intraday level since November 2023 earlier in the week, reaching 4.818% on Wednesday, driven by mounting concern over fiscal debt, sticky inflation and rising global energy prices. 

Volatility Index VIX Declines 5.92% as Market Fears Ease 

The CBOE Volatility Index (VIX) declined 5.92% to 14.30, indicating moderating market volatility expectations. The drop in the VIX reflected the relief rally triggered by Waller’s dovish remarks, as investors scaled back their rate‑hike bets and became more comfortable taking on risk. The Fear & Greed Index, however, remained in the “Fear” range at 35/100, down from 55 (Neutral) the previous week. 

Also Read: What Is the New York Stock Exchange (NYSE)?

Consumer Discretionary Leads Sector Gains, Real Estate Sole Loser 

Among the 11 primary S&P 500 sectors, Consumer Discretionary emerged as the top performer, gaining 1.9%, as easing rate‑hike expectations improved the outlook for consumer spending and big‑ticket purchases like vehicles. Communication Services followed with a 1.16% advance, while Materials enjoyed the biggest percentage gains among all sectors. Financials and Information Technology also posted solid gains. Real Estate was the sole sector in negative territory, declining 0.79% as higher long‑term yields continued to pressure property trusts. The Energy sector faced headwinds as stable crude prices weighed on producer margins. 

Top Gainers and Losers: Palantir and Snowflake Surge, Victoria’s Secret and Campbell’s Slump 

Among the top gainers on Thursday, Palantir Technologies surged 7.71% as software stocks rallied broadly following Snowflake’s strong results and the broader tech sector rebound. Snowflake jumped approximately 17% after reporting better-than-expected quarterly results, with the data cloud company benefiting from strong AI demand. ServiceNow rose 6.49% and CrowdStrike Holdings gained 5.68%, reflecting the broader software sector rally. Dell Technologies advanced 4.63% and Oracle climbed 5.69%. 

On the losing side, Victoria’s Secret plunged approximately 14% after reporting second-quarter net sales of $1.61 billion that fell short of the $1.62 billion consensus estimate. Campbell’s Company dropped approximately 7% after issuing a weaker-than-expected fiscal 2027 earnings forecast, with the company projecting earnings of $1.65 to $1.80 per share against a FactSet consensus of $1.83 per share. Broadcom declined nearly 3% following its fourth-quarter revenue forecast that came in at $34.8 billion against the $35.05 billion estimate. Hewlett Packard Enterprise fell more than 5% despite reporting strong quarterly results, as the stock faced pressure following a significant rally earlier this year. 

Magnificent Seven Stocks Rally, Led by Tesla’s 5.42% Surge 

The Magnificent Seven technology stocks provided significant support to the Nasdaq’s advance, with all seven ending in positive territory. Tesla led the group with a 5.42% surge, while Meta Platforms gained 3.01% and Microsoft added 2.68%. Alphabet rose 1.59%, Amazon advanced 1.54%, Nvidia gained 1.80%, and Apple added 0.97%. The broader technology sector rebounded after being under pressure earlier in the week due to rising bond yields. 

Semiconductor Stocks Underperform, Financial and Energy Stocks Show Mixed Results 

Semiconductor stocks largely underperformed the broader market on Thursday, with the PHLX Semiconductor Sector Index managing only a modest 0.11% gain. Investor caution over valuation and near‑term demand continued to weigh on chipmakers, even as the overall market rallied. The sector’s muted performance reflected ongoing concerns about inventory levels and potential demand slowdowns in the second half of the year. 

Financial stocks performed strongly, benefiting from the decline in Treasury yields and easing rate‑hike fears. Major banks and financial institutions saw broad-based gains, with the financial sector advancing 0.79%. The sector’s performance was supported by expectations that a stable interest rate environment could provide more predictable lending margins and reduced volatility in fixed-income portfolios. 

Energy stocks faced headwinds despite elevated oil prices, as stable crude prices weighed on producer margins. The energy sector managed only a modest 0.32% gain, underperforming the broader market. The sector’s muted performance reflected concerns that sustained high oil prices could trigger demand destruction and potentially lead to lower refining margins. Additionally, geopolitical tensions in the Middle East created uncertainty about future supply dynamics, limiting investor enthusiasm for energy stocks. 

ISM Services PMI Surges to 55.4, Six-Month High 

Economic data released on Thursday provided additional support to market sentiment. The Institute for Supply Management (ISM) Services PMI rose to 55.4 in August, up from 54.1 in July and surpassing the Dow Jones consensus estimate of 54.1 – the strongest reading in six months. The ISM Services New Orders Index surged to 60.9 – a three‑and‑a‑half‑year high – from 57.2 in July, while the Business Activity Index rose to 61.7 from 59.1. However, the Prices Paid Index climbed to 72.6 from 70.3, its highest level since October 2022, signalling persistent inflationary pressures in the services sector. 

Jobless Claims Tick Up to 206,000, Trade Deficit Widens to $88.6 Billion 

Initial jobless claims for the week ending 29 August totalled 206,000, slightly above the 205,000 consensus estimate but remaining within a historically tight range. Continuing claims rose by 8,000 to 1.78 million. The US trade deficit surged by 24.4% in July, reaching $88.6 billion – the highest level since March 2025. The widening was driven primarily by a sharp increase in imports of technology‑related goods, reflecting the ongoing artificial intelligence infrastructure buildout. Capital goods imports jumped $14.4 billion, including $6.9 billion in computers, $6.6 billion in accessories and $1.2 billion in semiconductors. The trade deficit with Mexico surged $7.2 billion to $27.5 billion, while the shortfall with Canada plunged $3.7 billion to $3.2 billion. 

Also Read: What Is the S&P 500? A Simple Guide for Everyday Investors

US Dollar Index Slips to Near 99 as Yen Surges on Intervention Speculation 

The US Dollar Index (DXY) weakened to approximately 99.59, extending the previous session’s losses as a sharp rally in the Japanese yen weighed on the greenback. The dollar dropped more than 2% against the yen, hitting a session low of 155.50 yen per dollar – its weakest level since 3 August. The yen’s sharp appreciation was driven by fresh speculation of Japanese intervention to support the currency, alongside increased bets on a Bank of Japan interest rate hike following hawkish remarks from central bank officials. The euro edged higher to $1.1588. 

Oil Holds Above $90, Gold Jumps 1.22% on Dollar Weakness 

Oil prices remained elevated on Thursday, with West Texas Intermediate (WTI) crude futures holding near $91.01 per barrel, up 0.88% on the session. Brent crude traded near $95.20 per barrel. The sustained strength in oil prices reflected escalating US‑Iran tensions, with the US carrying out several rounds of strikes against Iran targeting radar systems and mine‑laying capabilities along Iran’s southern coast. Iran retaliated with drone and missile attacks on US bases across the Middle East. President Donald Trump said the latest attacks on Iran would be short‑lived, while maintaining that the US remains prepared to launch further strikes if necessary. Despite the renewed tensions, crude shipments continued to move through the Strait of Hormuz at an estimated average of around 8 million barrels per day, helping ease immediate concerns over a complete supply disruption. 

Gold prices jumped 1.22% to approximately $4,381.68 per ounce as the weaker dollar and retreating Treasury yields boosted demand for the non‑yielding precious metal. Silver also gained 1.93% to $65.31. Natural gas rose 1.79% to $2.956, while copper eased 0.41% to $14,216. 

Thursday’s sharp rally was driven primarily by Federal Reserve Governor Waller’s dovish signals, which significantly reduced market expectations for a September rate hike to 50.4% from 63.2%. The upcoming August jobs report on Friday and the Consumer Price Index release on 11 September will be critical in determining the Fed’s policy direction at the 15-16 September meeting. Traders should monitor Treasury yield movements and oil price dynamics, as both remain key drivers of inflation expectations and monetary policy outlook. 

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