U.S. stocks rose after comments from a Federal Reserve official took the sting out of rising oil prices by suppressing Treasury yields.
The Dow Jones Industrial Average rose 624.16 points, or 1.18%, to 53686.11. The S&P 500 gained 81.11, or 1.06%, to close at 7747.71, within 0.7% of its record closing high. The tech-heavy Nasdaq Composite rose 366.23, or 1.4%, to 26584.06.
The yield on the policy-sensitive two-year Treasury declined 0.051 percentage point to 4.332%. The yield on the 10-year Treasury note fell 0.032 percentage point to 4.761%. The yield on the 30-year bond slipped 0.023 percentage point to 5.243%.
Federal Reserve Gov. Christopher Waller made a case for keeping rates on hold, calling for the patience to "give disinflation a chance." Waller said he would look for continued signs of disinflation in August price data before committing to a holding pattern.
The dollar fell sharply in the wake of Waller's statement, buoying commodities priced in the greenback. Rate-sensitive gold futures gained $125.40, or 2.9%, to $4491.70 a troy ounce, for its biggest one-day dollar and percentage gain in almost a month.
On the Fed funds futures markets, the odds of a hike at the central bank's meeting in less than two weeks are now a toss-up.
In one inflationary development, oil futures gained 29 cents, or 0.3% to $91.30 a barrel, closing at a six-week high, after the U.S. and Iran continued to exchange fire near the Strait of Hormuz.
Elevated Treasury yields have driven the average 30-year fixed mortgage rate to 6.71%, the highest in more than a year, according to the latest survey from Freddie Mac.
Economic data continued to point to growth.
The Institute for Supply Management's purchasing managers index for services providers was 55.4 in August compared with 54.1 in July, suggesting increased consumer spending and mounting inflation.
With rate fears easing, investors piled back into artificial-intelligence bets.
Nvidia agreed to buy New York AI startup Hugging Face in a deal worth roughly $13 billion, the latest acquisition by the chip giant at the center of the AI boom. Nvidia shares rose 1.8% to $228.45.
Shares of Snowflake jumped 17% to $356.47 after the software maker said an AI-powered computer-coding agent bolstered quarterly sales growth.
Tesla shares rose 5.4% to $376.37 after the electric-car maker scheduled an event related to its Cybercab, which investors construed as the likely commercial launch of the long-awaited robotaxi.
Meatpacker Tyson Foods declined 7.3% to $51.76 after the company warned revenue would grow by less than previously expected this year, citing pressure from volatile cattle prices.
Food processor Campbell's swung to a loss and logged lower sales in its latest quarter, hurt by higher costs that weighed on margins as well as softer demand. Shares of Campbell's fell 7% to $22.12.
Investors remain anxious about the private credit category, which includes loans made to corporations. Fund managers Blackstone and Cliffwater said that they would limit redemptions to 5% of overall shares in the large private-credit funds they run after receiving exit requests for at least twice those levels.