Stocks rally as Waller eases rate-hike worry: Thursday recap

Wall Street rallied Thursday, and the gains reached almost every corner of the market. The S&P 500 rose 1.1% to 7,747.71. The Dow Jones Industrial Average climbed 1.2% to 53,686.11, and the Nasdaq Composite added 1.2% to 26,584.06. It was the kind of clean, across-the-board session that had been scarce lately. Eight of the eleven sectors finished higher.

Financials led the board, up 1.6%, with banks and insurers among the day’s strongest names. Consumer discretionary stocks followed with a 1.4% gain, technology rose 1.3%, and real estate added 1.2%. Communication services and utilities also closed in the green. The weak spots were few and shallow. Energy was the softest group, off 0.7% as crude eased back from earlier in the week, while materials slipped 0.6% and consumer staples 0.3%.

The tone came from the Federal Reserve. Governor Christopher Waller said Thursday he would be inclined to support holding interest rates steady at the September 15-16 meeting, provided that upcoming inflation data show price pressures continuing to ease. That is a gentler stance than the one Chair Kevin Warsh has taken, warning that inflation is still too high and that the central bank has more work to do. Waller did leave the door open to a rate increase if the next inflation reading disappoints. Traders heard the softer message. Market-implied odds of a September hike fell by roughly 12 percentage points after his remarks, and the shift lifted appetite for risk across the tape.

The comments came as the labor market shows fresh signs of cooling. ADP reported Wednesday that private employers added 38,000 jobs in August, the smallest gain since January and well short of the 47,000 economists had expected. July’s figure was 46,000. The details were mixed. Education and health services added 45,000 positions and leisure and hospitality 16,000, while manufacturing shed 17,000 jobs and professional and business services lost 16,000. Softer hiring strengthens the argument for a central bank on hold.

Breadth was broad but uneven. The small-cap Russell 2000 rose 0.4%, trailing the large-cap indices as investors leaned toward bigger, more liquid names. The week’s tally is more mixed. Through Thursday the S&P 500 and the Dow are up 0.3%, while the Nasdaq is down 0.5% and the Russell 2000 off 1.5%. The retreat in volatility was sharper: the Cboe Volatility Index, Wall Street’s fear gauge, fell nearly 6% to 14.32, a low reading that points to calm rather than stress. Borrowing costs stayed high even so. The 10-year Treasury yield held around 4.79%, near the upper end of its recent range after a global bond selloff earlier in the week.

The week’s decisive data point arrives Friday. The Labor Department releases August nonfarm payrolls, and economists surveyed ahead of the report look for a modest gain, with the unemployment rate seen holding at 4.1%. That number, and the August inflation figures that follow, will frame the Fed’s debate before its September 15-16 meeting.

This is a general-market summary for information only — not investment advice, and not a recommendation regarding any security.