US Stocks Surge as Rate-Hike Expectations Ease Amid Disinflation Signals
US stocks surged on Thursday as comments from Federal Reserve Governor Christopher Waller indicating easing price pressures prompted investors to reduce their expectations of an interest rate hike.
The Dow Jones Industrial Average rose 624.16 points, or 1.18 percent, to 53,686.11, while the S&P 500 added 81.11 points, or 1.06 percent, to 7,747.71, and the Nasdaq Composite Index increased by 366.23 points, or 1.4 percent, to 26,584.06.
Market sentiment improved after Waller stated he observed promising signs of disinflation across the US economy, suggesting he could support maintaining benchmark interest rates at current levels at the Fed's next session. The signal led bond traders to sharply reduce the probability of a September rate hike to a toss-up, down from a 63-percent likelihood priced in just a day earlier.
James Knightley, chief international economist at ING, commented that 'Kevin Warsh's Jackson Hole speech has shifted the Federal Reserve's position from hold unless you have to hike, to hike unless you can justify a hold.' He added that while their macro projections suggest the Fed can afford to be patient, the shift in stance indicates an appetite for a hike to help ensure inflation returns to target.