S&P 500 Posts Best Monthly Gain, Financial Sector Hits New Record: Fed Statements Calm the Market

U.S. stocks posted their strongest gain in about a month on Thursday, September 3, thanks to comments from Federal Reserve Governor Christopher Waller. He stated that he was prepared to support keeping interest rates unchanged at the Fed’s September meeting. Following this, estimates of the likelihood of a Fed policy tightening declined, as did yields on U.S. Treasury bonds.

The S&P 500 broad-market index rose 1.06%, the tech-heavy Nasdaq Composite climbed 1.4%, and the blue-chip Dow Jones Industrial Average gained 1.18%. For the S&P 500 and the Dow Jones, this was the best one-day gain since August 4, according to MarketWatch and CNBC. The financial sector within the S&P 500 rose to a new record high of 972.16 points, compared with the previous high of 968.66 points set on August 25, MarketWatch noted.

The market’s reaction to Waller’s comments reflects a strong desire to get signals about what comes next, said Ben Fulton, CEO of WEBs ETFs, in a Barron’s article. “We’ve been living in a very opaque market environment where it was difficult to make sense of the information… the good news, I think, is that when the situation starts to become clearer, the market reacts positively,” Fulton noted. Traders are now roughly split in their assessment of the likelihood of the Fed keeping rates unchanged (49.5%) versus raising them at its next meeting (50.5%), according to the FedWatch tool. Just a day ago, the odds of the latter were estimated at 63.2%.

But the market faces a new test—the labor market report, which is expected on Friday, September 4, before the market opens, Barron’s warns. "Too hot" data is the main risk, as it would trigger a spike in bond yields, which, in turn, would weigh on stocks, says Tom Essaye, founder and president of Sevens Report, in the publication’s report.

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