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Fed Governor Christopher Waller's remarks not only spurred a relief rally on Wall Street but had an impact across asset classes, from gold to bond yields to even the US Dollar. 4 Min Read Benchmark indices on Wall Street had a strong session on Thursday, September 3, after Fed Governor Christopher Waller's remarks on the upcoming policy decision spurred a relief rally across indices and led to a decline in bond yields. The Dow Jones ended with gains of over 600 points, marking its best day since August 4, while the S&P 500 ended with gains of over 1%. The Nasdaq Composite also ended 1.4% higher overnight.
What Did Christopher Waller Say? Fed Governor Christopher Waller, one of the voting members of the Federal Open Markets Committee (FOMC), said at event on Thursday that his monetary policy vote will be "heavily influenced" by the inflation data for the month of August that will be released next week. Waller added that in case he sees progress on inflation moving towards the Fed's 2% target, he is prepared to vote for no change in interest rates.
He also said that he is seeing some signs of disinflation as higher energy costs have not spilled over broadly into other sectors. However, he did caution that in case the inflation print comes in hotter-than-expected, he is ready to vote for a rate hike as well to make the policy restrictive enough for the economy to cool. He expects "reasonable" CPI and PPI readings over the next month.
The US will report PPI data for August next Thursday, September 10, followed by the CPI print on Friday, September 11. What Was The Impact Of Waller's Remarks? Waller's remarks not only spurred a relief rally on Wall Street but had an impact across asset classes, from gold to bond yields to even the US Dollar.
The 10-year bond yield fell to as low as 4.73% from the recent highs of 4.82%, albeit briefly, before staging a rebound back to 4.77%. The 30-year yield also cooled to 5.22% before reversing some of those losses to move back to 5.25%. The actual impact was seen in the futures market for Fed predictions.
The CME FedWatch tool, which projected a 63% probability of the FOMC raising rates by 25 basis points on September 16, declined to 50%, with brokerages like Citi issuing contrarian calls that the next move from the central bank will be a cut and not a hike. A decline in the probability of the Fed raising rates also led to a relief rally in spot Gold prices, which moved back towards the $4,500 an ounce mark. Fed not raising rates is positive for Gold as it is a non-interest-yielding instrument.
The US Dollar index also fell to 99, the lowest level since May. However, crude oil prices continue to hover around the $96 a barrel mark. Has Waller Triggered A Wall Street Rally Before?
This is not the first instance of Christopher Waller triggering a rally on Wall Street. Back in April this year, Waller had said in a speech that once the temporary tariff effects were stripped out of the published price indices, the underlying US inflation was indeed running close to the Fed's 2% target. He had also said that if geopolitical conditions stabilized, the temporary oil price shocks will not derail the inflation outlook and rate cuts will remain "firmly on the table." Waller's remarks had led to the Dow Jones surging over 800 points on April 17, while the Nasdaq had gained over 1.5%.
What Is The Biggest Trigger For Wall Street on Friday? All eyes today will be on the non-farm payrolls report for the month of August, which will be released at 6 PM Indian time this evening. A consensus estimate of economists is projecting the figure to be at a positive 53,000 after negative revisions to figures of both June and July, while the unemployment rate is likely to remain constant at 4.1%.
Citi expects the figure to be only at 20,000 and the unemployment rate to inch higher towards 4.2%. Home Market News Dow Jones jumps 600 points after Christopher Waller spurs Wall Street yet again
Source: CNBC TV18
