The S&P 500 recorded its strongest single-day gain in a month, as market participants weighed comments from Federal Reserve Governor Christopher Waller, who expressed optimism that inflation is beginning to show signs of easing. In response, traders scaled back their bets on a September interest rate hike.

The benchmark index advanced 1.1%, with nine of the eleven major sectors closing in positive territory. Consumer discretionary, financials, and communication services led the gains, while energy, materials, and consumer staples lagged behind. The energy sector posted the weakest performance, declining 0.7%, as U.S. crude prices leveled off after briefly surpassing $93 per barrel.

In his address, Waller indicated that his upcoming rate decision would be "significantly influenced" by the August inflation data, which is scheduled for release next week. The tech-heavy Nasdaq 100 climbed 1.2%, marking its largest one-day advance in a week.

Chip stocks remained relatively subdued following Broadcom's earnings report. However, Nvidia advanced 1.8% after the company agreed to acquire artificial intelligence startup Hugging Face for approximately $13 billion. Louis Navellier, chief investment officer at Navellier & Associates, commented, "It's safe to say the AI data center boom is still ongoing."

Investors are now turning their attention to the nonfarm payrolls report due Friday, seeking further clarity on the Fed's monetary policy trajectory. Tesla surged 5.4%, delivering the strongest performance among the "Magnificent Seven" stocks, as the company gears up for its Cybercab event in Austin.

At the closing bell, the S&P 500 was up 1.1% at 7,747.71 points, while the Dow Jones Industrial Average gained 1.2% to 53,686.11 points. The Nasdaq Composite rose 1.4% to 26,584.06 points, the Nasdaq 100 advanced 1.2% to 29,482.32 points, and the Russell 2000 added 0.5% to 2,968.271 points.