Waller's rate-hold hint lifts Wall Street as Asia's chip rout deepens

• US: the S&P 500 ended 1.06% higher at 7,747.71, the Nasdaq Composite gained 1.4% to 26,584.06 and the Dow rose 1.18% to 53,686.11, all three finishing close to their session highs.
• Europe closed broadly firmer before the US rally had fully run: the FTSE 100 added 0.7% to 10,831.52, the DAX 0.63% to 26,003.32 and the Euro Stoxx 50 0.32%. The CAC 40 was the laggard at +0.07%.
• Asia went the other way. The Kospi fell 3.75%, the Nikkei 225 ended down 3.02% at 64,214.48, Taiwan's benchmark lost 2.32%, the Shanghai Composite 0.95% and the Hang Seng 0.46%.

The American session turned on one speech. Waller said that if August inflation shows continued progress he would be inclined to support leaving the policy rate — currently 3.50-3.75% — unchanged at the mid-September meeting, while explicitly keeping a hike on the table if prices reaccelerate. With the market having spent recent weeks worrying about tighter, not easier, policy, that was enough: the five-year Treasury yield fell 4.3 basis points and the ten-year 3.4bp to 4.762%, the dollar index shed 0.57%, and the rate-cyclical parts of the tape led, financials up 1.56% and consumer discretionary 1.39%.

The day's actual data cut against him. The August ISM services index came in at 55.4, its strongest reading in six months and ahead of consensus, with the prices-paid component at a multi-year high — firm activity and firm costs are not obviously the backdrop for a hold. Equities took the growth signal and left the inflation signal for another day.

Asia's decline is a separate story that the US close did not resolve. Semiconductor and AI-hardware names were sold across Seoul, Taipei and Tokyo, and a sharp yen rally — the dollar down 1.97% against it to 155.79, after hawkish Bank of Japan commentary lifted bets on a September hike — added a currency headwind for Japanese exporters. Gold's 3.5% jump to $4,519 fits the weaker-dollar, lower-real-yield read rather than any risk aversion; it still sits 19% below its 52-week high.

Volatility gave way on both sides of the market: the VIX fell 5.79% to 14.32 and the MOVE index of rates volatility dropped 6.31% to 74.68, so the equity rally was not being hedged into. Dispersion was the ordinary cyclical kind — financials +1.56% and technology +1.29% against energy -0.74% and staples -0.32% — rather than a narrow handful of names carrying the index. The split is geographic instead: on PrimerIQ's own universe, Asian decliners outnumbered advancers by roughly three to two (a 0.65 advance-decline ratio), while Europe ran at 1.38 and the UK at 1.73. Gold up 3.5% and bitcoin up 5.38% alongside a strong equity close point to dollar debasement trades, not a flight to safety.

The ISM services index for August printed at 10:00 ET (15:00 BST) at 55.4, up from July and above the median forecast, with new orders and business activity strong and prices paid at their highest in years. Initial jobless claims at 08:30 ET came in at 206,000 against about 205,000 expected — no signal either way. Waller's remarks landed during the US morning and did the rest of the work.

The test is tomorrow: the August employment report at 08:30 ET Friday (13:30 BST), with consensus looking for roughly 53,000 payrolls and an unemployment rate steady at 4.1%. August CPI, the release Waller tied his own vote to, follows on 11 September.

Ciena set the tone before the open with fiscal third-quarter earnings of $2.11 a share against a $1.46 consensus. After the close the software prints were strong — Zscaler at $1.19 with first-quarter guidance above expectations, DocuSign at $1.16, UiPath at $0.15 and Samsara at $0.20 — but Lululemon dominated the tape, beating on earnings at $2.92 versus $1.79 expected while missing on revenue and cutting full-year guidance to $10.35bn-$10.5bn from $11bn-$11.15bn; the shares fell heavily in extended trading.