Markets rally on Fed rate-hike bets, yen strength amid mixed signals

Global financial markets moved higher on Thursday, September 3, 2026, as investors assessed Federal Reserve commentary and the Bank of Japan’s potential move, though the path for central bank policy remained uncertain. The Dow Jones Industrial Average rose by 1.18% to 53,686.11, while the S&P 500 gained 1.06% to 7,747.71, and the Nasdaq Composite climbed 1.40% to 26,584.06. European indices also advanced modestly, with the STOXX 600 index up 0.5% to 649.1. Bond markets reflected shifting expectations: the U.S. 10-year Treasury yield fell 3.8 basis points to 4.756%, while German yields declined by 2 basis points to 3.353%. Broadcom shares dropped 2.7%, though most large-cap stocks benefited from the broader rally. Meanwhile, the Japanese yen strengthened sharply, rising 2.08% to 155.47 per dollar, while the U.S. dollar index fell 0.69% to 98.91. Crude oil prices showed divergence: Brent futures fell 0.12% to $95.52 a barrel, while West Texas Intermediate futures rose 0.32% to $91.30. Spot gold edged up 1.99% to $4,473.40 an ounce, though earlier data showed a slight decline in some reports. The market had priced in a roughly 50% chance of a Federal Reserve rate hike at the September 14 meeting, down from about 63% the prior session. Separately, markets anticipated a 75% likelihood of a 25-basis-point hike by the Bank of Japan in September, following a period of dovish policy. The August U.S. jobs report was expected to show 56,000 new jobs and an unchanged unemployment rate at 4.1%. Commentary from Federal Reserve Governor Christopher Waller provided a broad lift for markets, though the absence of definitive guidance from Chair Kevin Warsh left traders navigating conflicting signals. Analysts noted that the Fed’s governors were voicing opinions in the absence of formal forward guidance, while hedge funds debated whether bonds remained a buying opportunity amid concerns over debt levels. The yen’s surge reflected both the BOJ’s potential hike and broader risk-off sentiment, while equities rallied on hopes of further easing in monetary policy. The mixed signals underscored the fragility of market expectations, with investors remaining cautious amid persistent geopolitical tensions, including the latest flare-up in the U.S.-Israel conflict with Iran and the broader economic backdrop.