Investors cheered a clear signal from the Federal Reserve that interest rates will remain on hold, sending stocks higher and bond yields lower after fresh inflation data pointed to cooling price pressures.
Wall Street Jumps on Fed Pause, Inflation Relief
The S&P 500 closed up 1.4% at 5,180, snapping a two-day losing streak. The Nasdaq Composite surged 2.1% to 17,200, led by a rebound in technology shares. The Dow Jones Industrial Average added 0.8% to finish at 40,100.
Yields on U.S. Treasuries retreated sharply. The 10-year Treasury yield fell 12 basis points to 4.20% after the latest Personal Consumption Expenditures (PCE) inflation report showed core prices rising at their slowest pace in over two years.
Fed Commentary Steadies Markets
The day’s rally was sparked by comments from Fed Chair Jerome Powell, who said in a press conference that the central bank is “prepared to be patient” and “sees clear signs of disinflation.” Powell’s remarks followed the PCE release, which showed core PCE inflation rising just 0.1% month-over-month and 2.6% year-over-year—both below economists’ forecasts.
Markets interpreted Powell’s tone as a strong signal that the Fed is unlikely to raise rates again this year, barring a surprise resurgence in inflation. Traders now see the odds of a rate cut before the end of 2026 climbing to over 60%, according to CME FedWatch data.
Key Movers: Tech Rebounds, Banks Lag
Technology stocks led the advance. Nvidia (NVDA) jumped 3.5%, reversing losses from earlier in the week, as investors rotated back into AI-related names. Apple (AAPL) and Microsoft (MSFT) each gained over 2%, buoyed by renewed optimism about consumer and enterprise demand.
On the downside, financials underperformed. JPMorgan Chase (JPM) slipped 0.7% as lower yields threaten bank lending margins. The energy sector was mixed despite a modest uptick in oil prices, with ExxonMobil (XOM) flat and Chevron (CVX) losing 0.3%.
Commodities and Currencies Mixed
Oil prices steadied as traders weighed Middle East supply risks against signs of slowing global demand. WTI crude settled at $78.40 per barrel, up $0.25 on the day. Gold edged higher, with spot prices closing at $2,110 per ounce.
In currency markets, the U.S. Dollar Index (DXY) slipped to 101.90 after the inflation data and Powell’s dovish comments. The euro (EUR/USD) strengthened, rising to 1.1300, as the greenback broadly weakened.
What to Watch
All eyes turn to Friday’s July jobs report, which will offer fresh insight into the labor market’s resilience. Investors will also monitor a heavy slate of earnings from major tech and consumer companies. Several Fed officials are scheduled to speak later this week, which could further clarify the central bank’s policy path.
With inflation showing signs of cooling and the Fed signaling patience, markets will be watching closely for any shifts in economic momentum or signs of a reacceleration in prices.