U.S. equity markets surged Thursday with their strongest performance in roughly a month after Federal Reserve Governor Christopher Waller signaled progress on disinflation, prompting bond traders to sharply reduce September rate-hike expectations.
Bond markets repriced the probability of a September Federal Open Market Committee rate increase to 50 percent, down from 63 percent Wednesday—a decisive 13-point swing that catalyzed broad-based risk appetite. The Dow Jones Industrial Average climbed 1.2 percent, the S&P 500 rose 1 percent and the Nasdaq Composite jumped 1.4 percent, all posting their strongest days since Aug. 4.
The yield on 10-year Treasurys fell to 4.74 percent. A weaker dollar accompanied the move lower in long rates, compounding the relief bid in risk assets. Bitcoin jumped more than 5 percent, tracking the appetite shift toward higher-volatility holdings.
Nvidia gained 1 percent after announcing plans to acquire Hugging Face, an open-weight AI platform, for roughly $13 billion, with closing expected in 2027.
Countervailing pressures remained in play. Brent crude oil futures held above $95 per barrel after President Trump confirmed the U.S. carried out a "very heavy attack" against Iran. Middle East escalation keeps inflation risk on the table despite Thursday's risk-on momentum.
Labor market data—due Friday in the jobs report—presented a mixed signal. Challenger, Gray & Christmas reported a slowdown in layoff announcements in August, consistent with a "low hire, low fire" environment. Jobless claims, however, ticked up to 206,000, exceeding economist estimates.
Broadcom slipped despite an earnings beat. The earnings season continues to reveal a structural shift: energy providers supporting AI infrastructure are outperforming the AI developers themselves as power costs surge, signaling a revaluation of the AI sector's value chain during high-energy periods.
