U.S. equities rallied into the close Thursday, with major indexes posting broad gains as investors balanced optimism around artificial intelligence with mounting anticipation of Friday’s critical August jobs report.

The Dow Jones Industrial Average climbed 350.06 points, or 0.77%, to 45,621.30. The S&P 500 advanced 53.82 points, or 0.83%, to 6,502.08, while the Nasdaq Composite added 209.97 points, or 0.98%, to finish at 21,707.70. Small caps joined the rally, with the Russell 2000 rising 2.93 points, or 1.25%, to 236.60.

Fed Politics Add to Uncertainty

Markets also digested testimony from Stephen Miran, President Trump’s nominee to the Federal Reserve Board of Governors, who appeared before the Senate Banking Committee. Miran sought to reassure lawmakers of his independence despite Democratic criticism that retaining his White House Council of Economic Advisers post could compromise the Fed’s autonomy.

“If I’m confirmed to this role, I will act independently, as the Federal Reserve always does,” Miran said in response to questioning. He emphasized that the Fed’s most important job is to “prevent Depressions and hyperinflations,” and pledged to preserve the central bank’s independence.

The hearing underscored the political tensions surrounding monetary policy at a moment when the Fed is already under scrutiny for its pivot toward prioritizing employment risks. Investors remain sensitive to any signals that could influence the credibility of upcoming jobs data or the central bank’s September 17 meeting.

Tech Leadership and AI Optimism

Technology once again led the advance. Wedbush analysts reiterated that the AI Revolution is entering its next stage, powered by unprecedented capital expenditures from Microsoft, Amazon, and Google. “The last six weeks we have seen a major validation moment for our AI Revolution bull thesis as the cloud stalwarts Microsoft, Amazon, and Google are leading the charge on this unprecedented spending cycle,” wrote Daniel Ives of Wedbush.

Nvidia’s recent commentary underscored strong demand for chips and infrastructure, supporting confidence that AI momentum is spreading beyond Big Tech to governments and enterprises worldwide.

Valuation Pressures Persist

Despite Thursday’s rally, market strategists warn equities remain vulnerable to higher rates. Globalt Investments highlighted that the S&P 500’s forward earnings yield (4.1%) has slipped below the 10-year Treasury yield (4.3%), leaving stocks with a negative equity risk premium for the first time in two decades. “With discount rates elevated, the equity risk premium compressed, and historical context suggesting valuations are stretched, the era of easy multiple expansion is over,” said J. Keith Buchanan, CFA.

Labor Market and Fed Policy in Focus

The gains came ahead of the August employment report due Friday. Bloomberg economists project nonfarm payrolls to rise by 75,000 with unemployment ticking up to 4.3%, reflecting slowing labor momentum. That follows ADP’s report of just 54,000 private-sector jobs added in August and rising weekly jobless claims at 237,000, reinforcing concerns about cooling demand.

The Federal Reserve has pivoted toward prioritizing employment risks, with futures markets assigning a 96% probability to a quarter-point rate cut at its September 17 meeting.

Retirement Savers Stay the Course

Meanwhile, longer-term investors continue to benefit from steady savings growth. Fidelity reported average 401(k) balances climbed to $137,800 in the second quarter, up 8% from a year earlier. IRAs and 403(b) accounts also posted gains. “Even during periods of turbulence, the majority of savers are wisely making the decision to stay the course and not make sudden changes to their retirement investments,” said Sharon Brovelli, president of Workplace Investing at Fidelity.

Outlook

Markets now turn squarely to Friday’s BLS report. With the Fed signaling that labor market weakness could outweigh inflation in shaping policy, the data may effectively cement a September rate cut. For now, Thursday’s rally shows that enthusiasm for AI and tech earnings continues to outweigh caution over valuations and economic headwinds.