Waller hints at hold, stocks post best day

US stocks had their strongest day in about a month. The S&P 500 closed up 1.03 percent at 7,745.40, the Dow Jones Industrial Average rose 1.13 percent to 53,663.99, and the Nasdaq Composite gained 1.36 percent to 26,574.46. Bond yields moved the other way, with the 10-year Treasury yield falling about five hundredths of a percentage point to 4.74 percent.

The whole day traces back to one set of remarks. Federal Reserve Governor Christopher Waller told Reuters the central bank should "give disinflation a chance" and that it can wait one meeting, meaning he could vote to leave interest rates where they are when the Fed meets on September 15 and 16. That matters because, unusually, the debate right now is about raising rates rather than cutting them. Oil has been climbing on the fighting between the US and Iran, with Brent crude holding above 95 dollars a barrel, and expensive energy feeds into the price of almost everything, so some Fed officials have wanted to raise rates to cool prices off. The Fed's benchmark rate currently sits in a range of 3.50 to 3.75 percent.

After Waller spoke, traders cut the probability they assign to a September increase from about 63 percent to about 50 percent, essentially a coin flip. Here is the chain. Treasury yields, which are what the US government pays to borrow, move with what investors expect the Fed to do, because nobody will lend to the government for ten years at a rate that a run of Fed increases would leave in the dust. When a hike starts to look less likely, investors accept a lower yield, and today they did, taking the 10-year down to 4.74 percent. Lower yields lift stocks for two reasons. Borrowing gets cheaper for companies, and a safe government bond paying less makes riskier stocks look better by comparison, especially fast growing technology companies whose profits sit years in the future.

Individual names moved on their own news underneath all that. Snowflake, a data software company, jumped more than 20 percent after forecasting stronger revenue than analysts expected. Broadcom fell about 4.9 percent even though its earnings beat expectations, because its own revenue guidance for the months ahead came in light, a reminder that markets pay for the forecast rather than the quarter just finished. Nvidia rose after announcing it would buy the AI platform Hugging Face.