Federal Reserve Governor Christopher Waller gave markets a conditional dovish signal on Thursday, saying recent data points to moderating inflation and that he would lean toward keeping the federal funds rate in a 3.50%-3.75% range if the next two weeks of data confirms that trend. The comment quickly cooled rate-hike pricing. CME FedWatch showed the probability of a 25-basis-point increase in September dropping from about 63% a day earlier to around 50%, while Polymarket put the figure at 41%.
Risk assets responded across the board. U.S. equities, Treasuries, gold and Bitcoin all moved higher.
Stocks, gold and Bitcoin rise as hike bets ease
The S&P 500 gained 1.07%, its biggest one-day advance since Aug. 4. The Nasdaq Composite rose 1.40%, and the Dow Jones Industrial Average added 1.18%. All three major indexes closed higher for a second straight session. The Russell 2000 rose only 0.51%, trailing the broader market. The VIX fell nearly 6% to 14.30.
Waller did not fully rule out another increase. He said next week’s August inflation data will carry significant weight, and that he would still consider backing a hike if CPI runs hot. Inflation pressure has not disappeared at the same pace as rate expectations. The August ISM services prices paid index rose to 72.6, the highest reading since August 2022.
Markets are now watching the Aug. payrolls report due on Sept. 4, the first major checkpoint in the “next two weeks of data” Waller referred to. Jim Bianco of Bianco Research said Waller’s remarks could leave the September meeting looking like “six votes for holding, five for hiking, and one undecided,” with the decisive vote possibly falling to Chair Jerome Powell.
Treasuries rebound, but supply and inflation still cap the move
Treasuries rallied, though the rebound was limited. The 2-year yield fell to about 4.3%, the 10-year yield dropped as low as 4.73%, and the 30-year yield touched 5.22% at one point. Goldman Sachs’ chief strategist said the bond market has become a “speed limiter” for stocks, with long-duration bonds under pressure from fiscal worries, capital being redirected to AI investment and sticky inflation.
Brokerage Mischler said supply pressure is also in focus, with 3-year, 10-year and 30-year Treasury auctions due after the Labor Day holiday.
The U.S. dollar index fell 0.58% to 98.95 and slipped below 99 intraday. The Japanese yen was the standout move in foreign exchange. Dollar-yen dropped nearly 1.8% to around 155.76, bringing the two-day decline to almost 3%, the biggest two-day move since August 2024. Markets tied the move to rising expectations for a Bank of Japan rate increase in September, with overnight index swaps fully pricing in a 25-basis-point move.
JPMorgan warned that if USD/JPY breaks below 155, about JPY 16 trillion to JPY 17 trillion in yen short positions, roughly $102.6 billion, could be forced to unwind. In theory, that could push the pair into a 142-146 range. Bloomberg estimates that pension funds and insurers in markets including Japan and Canada hold about $4.6 trillion in U.S. assets, but their FX hedge ratio is only 41%, the lowest since 2015. A 5-percentage-point increase in hedging could trigger roughly $230 billion in dollar selling.
Gold, silver and Bitcoin benefit from the rate shift
Gold was one of the biggest beneficiaries of the turn in rate expectations, climbing above $4,500 intraday. Spot silver rose 2.54% and reached as high as $67.32. Bitcoin also jumped, rising 5.08% and touching $82,300, its highest level since May 11.
Oil was steadier and mostly held at elevated levels. Risks tied to the Middle East and the Strait of Hormuz remained in place, but Saudi Aramco set the October official selling price for Arab Light crude to the U.S. at a $4.60-a-barrel premium to Argus sour crude. Traders read that as a sign spot tightness may be less severe than previously expected. U.S. Vice President Vance said Washington would not negotiate with Iran until attacks on commercial vessels stop.
Refined products were tighter than crude. Disruptions linked to the Middle East have slowed the recovery in fuel flows and kept supply tight. Data from AAA showed the U.S. national average retail diesel price rising to $5.783 per gallon, above the April wartime peak and the highest level in four years.
AI software leads while hardware names face a higher bar
High-beta stocks surged overnight. Alongside Waller’s dovish signal, earnings from Dell and Snowflake reinforced confidence in AI infrastructure demand and enterprise spending. Goldman Sachs’ broad U.S. AI index rose 1.24%, ahead of the 0.64% gain in non-AI groups. OpenAI formally released its GPT-6 Astra model and said it had been trained on more than 100,000 GPUs, reaching new levels in computer operation and cybersecurity tasks.
Most of the so-called Magnificent Seven moved higher. Tesla jumped 5.42%, Meta gained 3.01%, Microsoft added 2.68%, Nvidia rose 1.78%, Alphabet and Amazon each climbed more than 1.5%, and Apple rose 1%. The Philadelphia Semiconductor Index fell more than 2% early in the session but recovered to close up 0.11%.
AI software and data platform stocks were the strongest part of the tape. Snowflake posted results well above expectations, with product revenue growth accelerating for a third straight quarter. That revived the view that enterprise AI and data infrastructure monetization is taking shape. Palantir’s expanded partnership with PwC added to that trade.
AI hardware trades turned more selective. Broadcom beat expectations across its third quarter, and AI semiconductor revenue jumped 221% year over year. Still, its fourth-quarter revenue guidance came in slightly below expectations and its AI revenue outlook only narrowly topped forecasts. The stock fell 2.74% after being down nearly 7% intraday. Optical networking company Ciena lost more than 10%. Its results beat estimates, but guidance and gross margin did not meet elevated expectations. Goldman Sachs’ Rich Privorotsky said the valuation peak may already have been set during the second-quarter rebound, and that the market now needs proof AI spending can stay durable despite pressure on economics.
Oura files for listing as Tesla, Nvidia and Palantir stay in focus
Wearables and health technology also produced a fresh IPO marker. Oura filed for a U.S. listing on Nasdaq under the ticker OURA. In the nine months through June 30, revenue rose 74% to $1.21 billion. Net profit increased from $1.6 million a year earlier to $60.8 million. The company operates a hardware-plus-subscription model, with subscription gross margin at 89% and about 5 million paying members.
- Tesla rose 5.42%. Its Cybercab was formally unveiled in Austin and entered limited operations. The vehicle has no steering wheel or pedals, with a target price below $30,000. About 45 Cybercabs are now registered in Texas. Morgan Stanley analyst Andrew Percoco said the stock could react more positively if Tesla deploys 25 to 50 vehicles for paid rides in Texas within days to weeks of the launch.
- Volkswagen surged 9%. The company plans to expand job cuts to about 100,000. Its supervisory board approved the “Future Plan 2030” restructuring program, which includes cutting the number of vehicle models by about half.
- SpaceX rose 6.42%. The company applied to the U.S. FCC for permission to carry and operate a Starlink terminal on Starship’s 14th flight test. Oppenheimer raised its SpaceX price target to $280.
- Nvidia gained 1.80%. The company said it would acquire open-source AI platform Hugging Face for about $12.93 billion and keep the platform open. Nvidia also said RTX Spark devices powered by the N1X chip will ship in October.
- Palantir climbed 7.71% after expanding its partnership with PwC to help companies deploy AI in supply chains, customer management and cyber risk. Other AI application software names also rose, including ServiceNow, Salesforce, Adobe and Datadog.
- Dell Technologies rose 4.91% and hit a record high as investors continued to position for AI server and enterprise AI infrastructure demand.
- Biotech names also rallied. Summit Therapeutics gained 17.33%, and Hutchmed rose 17.19%.
Earnings movers and the next events on the calendar
Several earnings-driven moves stood out. Snowflake rose 16.55% to a record high after second-quarter revenue grew 35% year over year to $1.547 billion and the company raised full-year product revenue guidance. Broadcom fell 2.74%. Ciena dropped 10.36%. Hewlett Packard Enterprise gained 5.04% after beating revenue and profit expectations and raising full-year guidance for fiscal 2026 and 2027. ChargePoint surged 74.95% as quarterly revenue beat guidance, gross margin hit a record and losses narrowed sharply.
Lululemon fell more than 18% after hours after cutting full-year guidance again. The company now expects fiscal 2026 revenue to fall 5% to 7% year over year, versus its earlier view of flat to down 1%. It expects full-year earnings per share of $9.48 to $9.73, down from a prior range of $10.95 to $11.15. Second-quarter revenue fell 4% to $2.42 billion, and comparable sales declined 9%.
Among other large-cap names, Meta rose 3.01%, Alphabet gained 1.59%, Amazon added 1.54% and Apple rose 1.00%. Apple is facing a lawsuit in Texas from BASF subsidiary trinamiX, which alleges that Face ID technology in iPhone 15 through 17 models and iPad Pro devices infringes seven patents. Microsoft gained 2.68% and said it will begin reporting Azure cloud revenue on a quarterly basis. Azure revenue in the latest quarter was $29.4 billion.
The next major events on the calendar are the U.S. August nonfarm payrolls report on Sept. 4 at 20:30 and the OPEC+ seven-country monthly meeting on Sept. 6. The market expects payroll growth of about 55,000 to 58,000 and an unemployment rate of 4.1%. Stronger-than-expected jobs and wage data could revive September hike pricing and lift the dollar and short-dated yields, while weighing on the Nasdaq, gold and long-duration growth stocks. A weaker payrolls print could reduce hawkish pricing and support Treasuries, gold and technology shares.
At the OPEC+ meeting, members will assess the execution of the planned September output increase of 188,000 barrels per day and review global oil supply and demand. If tensions between the U.S. and Iran remain elevated, the group’s language could directly affect the risk premium in Brent and WTI.