By Caroline Valetkevitch and Amanda Cooper
NEW YORK/LONDON, Sept 3 (Reuters) - Major stock indexes rallied while bond yields fell on Thursday as comments from Federal Reserve Governor Christopher Waller signalled a willingness to remain patient on raising interest rates.
Waller, in remarks for a Reuters NEXT Newsmaker event, said that, if upcoming data confirmed inflation pressures were cooling off, he was inclined to argue in favor of keeping interest rates steady at the U.S. central bank's next policy
meeting.
Expectations for a rate increase at the Fed's mid-September meeting came down after the comments, with the market now pricing in a roughly 50% chance for a hike, versus 63.2% in the prior session, according to CME FedWatch.
Global bond yields had jumped earlier this week as inflation worries mounted with the biggest flare-up since July in the U.S.-Iran war and a rise in oil prices.
"You have a lot of crosscurrents in the bond market going on right now," said Bruce Zaro, managing director at Granite Wealth Management in Plymouth, Massachusetts.
"You have the governors coming out and voicing their opinions in the absence of forward guidance by (Fed Chair Kevin) Warsh. And you have a lot of hedge fund managers coming out and saying, contrarily, that this is probably a buying opportunity in bonds in that the total amount of debt doesn't seem to be a problem."
The yield on the benchmark U.S. 10-year Treasury note fell 3.6 basis points, on track for its biggest fall since August 25, to 4.758%. On Wednesday, the yield on the note hit 4.818%, its highest since November 1, 2023. Earlier, 10-year German yields were down 2 bps at 3.353%.
YEN JUMPS ON RATE HIKE BETS
The easing of bond yields boosted sentiment in stocks, while the Japanese yen jumped by 2% against the U.S. dollar as traders ramped up bets on a Bank of Japan interest rate hike. The dollar added to losses following Waller's comments. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.72% to 98.88.
A sharp, sudden rise in the yen against the dollar on Wednesday fueled speculation that Japanese officials had intervened to shore up the currency, but analysts pointed to BOJ data showing no official intervention behind the Wednesday move.
The day's U.S. economic data supported the view that the jobs market was slow but stable, but investors are eager to see Friday's U.S. monthly jobs report for more clues.
The Dow Jones Industrial Average rose 613.15 points, or 1.16%, to 53,675.10, the S&P 500 rose 75.23 points, or 0.98%, to 7,741.83 and the Nasdaq Composite rose 336.84 points, or 1.29%, to 26,555.54.
MSCI's gauge of stocks across the globe rose 11.82 points, or 1.03%, to 1,154.69. The pan-European STOXX 600 index rose 0.49%.
New York Fed President John Williams said on Wednesday that rising long-term bond yields were a reflection of a solid economy rather than inflation fears, adding that he was still collecting information to drive his next monetary policy decision.
In commodities, U.S. crude rose 0.74% to $91.69 a barrel and Brent rose to $95.75 per barrel, up 0.13% on the day. U.S. strikes on Iran and renewed Israeli threats against Tehran fueled concerns about disruptions.
(Reporting by Caroline Valetkevitch in New York and Amanda Cooper in London; Additional reporting by Rocky Swift in Tokyo; Editing by Shri Navaratnam, Kate Mayberry, Susan Fenton and Alex Richardson)
