US Markets Rally as Fed Signals Potential Rate Hike Pause
By ThePip Desk
US indices surge as Fed Governor Waller hints at a rate hike pause amid cooling inflation and strong Services PMI data. See how markets reacted today.
Market Performance and Fed Outlook
US markets finished Thursday in the green after Federal Reserve Governor Christopher Waller indicated that further interest rate hikes might prove unnecessary, provided upcoming inflation data remains moderate. This commentary provided a significant lift to investor sentiment throughout the session.
- Dow Jones Industrial Average: rose 624.16 points or 1.18 percent to 53,686.11.
- Nasdaq: increased 366.23 points or 1.4 percent to 26,584.06.
- S&P 500: gained 81.11 points or 1.06 percent to 7,747.71.
Economic Indicators Drive Sentiment
Optimism was further bolstered by data from the Institute for Supply Management, which showed the Services PMI reached 55.4 in August 2026. This figure surpassed market expectations of 54.3 and marked the strongest expansion in the sector over a six-month period.
- Business Activity: rose to 61.7 from 59.1.
- New Orders: increased to 60.9 from 57.2.
- Inventories: climbed to 56.7 from 51.4.
Productivity and Trade Data
The Labor Department confirmed that nonfarm business-sector labor productivity grew by 1.4% in the second quarter of 2026. This performance remains consistent with preliminary estimates and follows a 0.8% increase recorded in the first quarter of the year.
- Output Growth: increased by 1.7 percent.
- Hours Worked: rose by 0.3 percent.
- Trade Deficit: widened to $88.6 billion in July 2026.
While the trade deficit reached its largest gap since March 2025, traders largely overlooked the figure despite it falling short of the anticipated $90 billion deficit. The market remains focused on the broader implications of the Fed’s potential shift in monetary policy.