Wall Street Ends Its Losing Streak as Fed Rate-Hike Fears Begin to Fade

A Rough Week Gets a Welcome Reprieve

After three bruising days of losses, Wall Street finally caught its breath. Stocks rose on Wednesday as U.S. Treasury yields took a breather from the recent run-up that had sent them to multiyear highs. The S&P 500 advanced 0.46% to 7,666.60, while the Nasdaq Composite gained 0.45% to close at 26,217.83. The Dow Jones Industrial Average added 295.07 points, or 0.56%, to end at 53,061.95. It was a modest but meaningful bounce — one that investors had been waiting for.

The 30-stock Dow was boosted by a rise in shares of Nvidia and Johnson & Johnson. Stocks had been pressured lately by elevated bond yields as traders worried about the impact of rising oil prices on inflation. That pressure had been building for weeks, tied directly to escalating tensions in the Middle East. Global financial markets had tumbled on Tuesday, September 1, as escalating military strikes between the United States and Iran drove up crude oil prices and intensified investor anxiety over inflation.

Bond Yields Hit Alarming Highs — Then Pulled Back

The bond market was at the heart of this week's turbulence. The benchmark U.S. 10-year Treasury note yield hit a high of 4.818% on Wednesday — a level not seen since November 2023. The two-year yield reached 4.41%, its highest level since January 2025. When yields spike like this, borrowing becomes more expensive across the economy — for mortgages, car loans, credit cards, and business investments. Stocks, particularly in the technology sector, tend to suffer as a result.

Then Thursday brought a dramatic turn. U.S. stocks surged after Fed Governor Christopher Waller said inflation is showing encouraging signs of cooling and suggested he could support keeping interest rates unchanged at the Fed's September meeting if upcoming inflation data confirms that progress. The comments triggered exactly the combination stock investors had been waiting for: rate-hike expectations fell, Treasury yields eased, and stocks rallied. The 10-year Treasury yield fell to around 4.75% after his remarks, pulling back from its highest level since November 2023.

Thursday's Surge: Wall Street's Best Day in Weeks

The Dow Jones Industrial Average advanced 635 points, or 1.2%, marking the index's strongest single-session performance since August 4. The S&P 500 added 1% and the Nasdaq Composite climbed 1.3%. The broad S&P 500 rally included all but two of its sectors, with consumer stocks leading gains. Snowflake stock surged more than 20% after the company topped second-quarter earnings and revenue estimates and offered an upbeat outlook. Not every earnings story was a winner, though — Broadcom stock fell 4% after the company paired its latest quarterly results with a fiscal fourth-quarter revenue forecast that fell short of what analysts had anticipated.

After Fed Chair Kevin Warsh's hawkish Jackson Hole speech and another surge in oil prices, investors had increasingly expected the Fed to raise rates again in September. On Wednesday, markets were pricing roughly a 63% probability of a hike. After Waller's remarks Thursday, those odds dropped to approximately 50%. That shift — from near-certainty to a coin flip — was enough to send markets sharply higher.

All Eyes Now on the Jobs Report and the Fed's Next Move

With the dust settling from a volatile week, attention shifted quickly to Friday's August jobs report. August nonfarm payrolls represent one of two economic milestones scheduled before September 16, when the Fed makes its next rate decision. Analysts expect August jobs growth near 45,000, an improvement from the 23,000 decline in July that surprised Wall Street. A strong number could reignite rate-hike fears; a weak one might seal the case for holding steady.

Vice President JD Vance added to the political noise on Thursday, calling for the Federal Reserve to cut interest rates to make homes more affordable — adding to the pressure President Donald Trump has placed on the central bank. The remarks came days after Trump's handpicked Fed chair, Kevin Warsh, hinted at the possibility of doing the opposite: addressing persistently high inflation by hiking rates. That tension between the White House and the Fed adds another layer of uncertainty heading into the September 15-16 meeting. For everyday Americans, the outcome will ripple through everything from mortgage rates to savings account yields — making the next two weeks of economic data among the most consequential of the year.