S&P 500 rises 1.1% as Waller leans toward holding rates
Thursday, September 3, 2026: S&P 500 +1.1% to 7,748 after Fed Governor Christopher Waller backed a possible September hold; ISM services prices paid 72.6, highest since October 2022.
Federal Reserve Governor Christopher Waller said in prepared remarks at a Reuters NEXT Newsmaker interview in Washington that if the next two weeks of data keep showing disinflation, he would be inclined to leave the federal funds rate at 3.50% to 3.75%. The Institute for Supply Management's August services prices index printed 72.6, its highest since October 2022. The S&P 500 added 82 points, or 1.1%, to 7,748 at Thursday's close, with 3,866 of 4,635 priced U.S.-listed ETFs finishing higher.
A hold, with an if
Waller's prepared remarks put the condition in the first paragraph. Inflation, he said, remains "meaningfully above" the FOMC's 2% goal, but "recent data suggest we are finally seeing some signs of disinflation." If that continues in the numbers due before the September 15-16 meeting, he would support holding the rate. He also said that if inflation comes in hot, he would consider a hike.
August services PMI rose to 55.4, a 26th consecutive month in expansion, with business activity at 61.7 and new orders at 60.9. Employment stayed in contraction for a second month at 47.8. The prices index at 72.6 was the fifth reading above 70 in six months. Earlier, initial jobless claims for the week ended August 29 printed 206,000, up 2,000. Services are busy, they are not hiring, and they are still paying more.
Fed funds futures implied a 48.4% chance of a September hike, down about 15 percentage points from Wednesday. The 20-year-plus Treasury fund TLT rose 0.1% on some of its lightest volume in 20 sessions, and the 10-year yield was 4.77%. Investment-grade credit fund LQD gained 0.1% on some of its lightest volume in that window. A 1.1% equity day on a 0.1% long-bond day, with hike odds cut to a coin flip, is a September hike being taken down.
The dollar fund UUP fell 0.6% on some of its heaviest volume in 20 sessions. The Cboe Volatility Index dropped 5.8% to 14.32, still in the mid-14s where it has spent the past few sessions.
Nvidia, the AI chip designer and the largest holding in the S&P 500 fund SPY, rose 1.8% after agreeing to acquire Hugging Face, the open-model platform, for about $11.9 billion payable to stockholders plus up to $1.0 billion of employee retention, with a close expected in the first half of 2027. Nvidia added 0.15 percentage points to SPY.
Financials and bitcoin capture the bid
Eight of 11 SPDR sector funds closed higher. The financials fund XLF led, up 1.6%; energy XLE was last, down 0.7%.
Eight of 11 sectors rose, led by financials
- +1.6%
- +1.4%
- +1.3%
- +1.2%
- +1.0%
- +0.9%
- +0.8%
- +0.2%
- −0.3%
- −0.6%
- −0.7%
The 2.3-percentage-point gap from financials to energy was a tight spread for a 1.1% day.
Inside XLF, JPMorgan Chase added 0.19 percentage points and Goldman Sachs 0.12. Robinhood Markets, 1.0% of the fund, rose 16.6% and contributed 0.17 percentage points, almost matching JPMorgan from a fraction of the weight. Goldman, the Dow's largest member by share price at 11.2% of the Dow industrials fund DIA, rose 3.3% and accounted for 0.38 percentage points of that fund's 1.2% gain, about a third of the move.
Microsoft added 0.15 percentage points to SPY; Tesla added 0.08. Palantir Technologies, the data-analytics software company, rose 7.7%, adding 0.13 percentage points to the Nasdaq-100 fund QQQ.
The louder session was crypto. The iShares bitcoin fund IBIT rose 5.8%, and all 12 spot bitcoin funds in the group closed higher, median 5.8%. All 22 crypto-equity funds rose, median 7.9%. Coinbase Global, the crypto exchange, gained 10.1%. Strategy, the bitcoin-treasury software company, jumped 17.6%.
Broadcom falls on a beat; energy lags oil
Broadcom, the chip designer, fell 2.7% a day after reporting fiscal third-quarter results that beat estimates on earnings and revenue, the largest drag on SPY at 0.07 percentage points. All five 2x long Broadcom funds closed lower, median −5.7%.
Oil did not buy energy stocks. The oil fund USO rose 0.7%, a fourth straight gain that began Monday, August 31. The energy fund XLE still fell 0.7%.
USO climbed 9.3% in five sessions; XLE reversed Thursday
- USO · 142.09
- XLE · 64.62
ExxonMobil, 20% of the fund, fell 1.2% and was the largest drag.
Elsewhere, Snowflake, the cloud data company, closed 16.6% higher after a fiscal second-quarter beat; shares had traded as high as $384.55 before giving some of that back. Ciena, the networking-equipment company, dropped 10.4% after reporting EPS of $2.11 against a $1.73 estimate. Ultragenyx Pharmaceutical fell 44% after its Phase 3 Aspire study in Angelman syndrome missed its primary and key secondary endpoints, the largest drag on the Russell 2000 fund IWM. The gold fund GLD rose 1.8%, leaving it down 2.9% over five sessions.
Friday's payrolls open the two weeks of data Waller conditioned the hold on. Inflation figures follow next week. The September 15-16 meeting is the test of whether 72.6 services prices and a coin-flip hike probability can live together.
Frequently asked
What exactly did Waller say?
He said inflation remains meaningfully above the Fed's 2% goal but recent data show signs of disinflation, and if that continues he'd be inclined to leave the federal funds rate where it is.
If services prices are that hot, why did stocks rally?
Traders focused on Waller's conditional hold, cutting implied September hike odds to 48.4%, about 15 percentage points lower than the day before.
Which parts of the market led?
Financials led the sector funds and energy lagged, while bitcoin and crypto-equity funds posted the biggest gains of the session.
Why did energy fall when oil rose?
Oil notched a fourth straight gain, but the energy fund still fell, with ExxonMobil the largest drag.
What comes next?
Friday's payrolls start the two weeks of data Waller tied his hold to, with inflation figures following the week after and the FOMC meeting after that.