(Updates with index/price moves, macroeconomic data, and company/geopolitical news from the first paragraph.)

US equity indexes rose as government bond yields slumped amid a fall in market expectations of an interest rate increase as early as this month.

The Nasdaq Composite rose 1.3% to 26,555.7, the S&P 500 climbed 1% to 7,740.9, and the Dow Jones Industrial Average advanced 1.2% to 53,675.5. All sectors except materials rose. Communication services, consumer discretionary and financials topped the gainers.

Federal Reserve Governor Christopher Waller said he would be "inclined to support" holding rates steady at the next Federal Open Market Committee meeting in September if the August inflation print shows progress toward the central bank's 2% goal.

The probability of the Fed raising its target rate by 25 basis points to 3.75%-4.0% in September slumped to 50% after midday Thursday from 63% a day ago, according to the CME FedWatch tool. The remaining likelihood is that policy will remain on hold.

Treasury yields fell, with the 10-year down four basis points to 4.75% and the two-year lower by five basis points to 4.34%.

Gold futures surged 2.7% to $4,534.7, and silver futures soared 3.4% to $67.67.

The US and Iran have intensified tit-for-tat military strikes in recent days, remaining locked between ceasefire and all-out war as the White House struggles to end the six-month conflict, Bloomberg reported. Iran said it attacked bases in Kuwait and the United Arab Emirates "in response to America's crimes against the Iranian people," Al Jazeera, a Middle Eastern broadcaster, reported.

The front-month US West Texas Intermediate crude oil contract added 0.7% to $91.62 per barrel, and global benchmark North Sea Brent climbed 0.1% to $95.73 per barrel.

In economic news, initial jobless claims rose sequentially to 206,000 during the week ended Aug. 29 from an upwardly revised 204,000, compared with expectations for an increase to 205,000 in a Bloomberg-compiled survey. The four-week moving average rose by 1,500 to 207,250.

The Institute for Supply Management's US services index rose to 55.4 in August from 54.1 in July, compared with expectations for no change in a survey compiled by Bloomberg. The index now sits at its highest since February, before Operation Epic Fury and the run-up in energy prices from the closure of the Strait of Hormuz, according to a Jefferies note.

The ISM reading is in line with the New York Fed and Dallas Fed's services prints that indicated expansion. The other regional Fed measures indicated contraction.

The S&P Global US services index was revised downward to 56.5 in August from the 56.8 flash reading, as expected in a survey compiled by Bloomberg. The August print remains above July's 54.6.

In company news, Nvidia (NVDA) has agreed to acquire Hugging Face for $12.93 billion, Chief Executive Jensen Huang said in a blog post.