Market Overview

At 12:48 ET (16:48 GMT) the S&P 500 slipped 0.1% to 7,722.64 points, the Dow Jones Industrial Average was essentially flat at 53,584.97, and the Nasdaq Composite fell 0.3% to 26,469.46. The modest declines came after Federal Reserve Chair Kevin Warsh delivered a hawkish keynote at the Jackson Hole Economic Policy Symposium, emphasizing that underlying inflation trends have not "meaningfully improved" and that the Fed’s primary focus must remain price stability.

Warsh noted that the personal consumption expenditures (PCE) price index rose 3.7% year‑over‑year in July, with the core PCE (excluding food and energy) up 3.3% YoY, both well above the Fed’s 2% target. He added that comparable measures from the consumer price index (CPI) were also elevated, reinforcing the view that inflation remains above target.

The speech was interpreted as hawkish, prompting the CME FedWatch tool to lift the probability of a 25‑basis‑point rate hike at the September FOMC meeting to more than 59%, up from roughly 35% the previous day. Former Boston Fed president Eric Rosengren described the remarks as “generally hawkish.”

In the bond market, Treasury yields rose sharply: the benchmark 10‑year yield increased 5.2 basis points to 4.724%, while the more rate‑sensitive 2‑year yield climbed 10.9 basis points to 4.341%. A surprise Treasury Department intervention the week before had little impact on curbing the yield surge.

Equity market dynamics were buoyed by the “Magnificent Seven” stocks, especially Nvidia Corp. Nvidia reported an exceptionally strong quarterly earnings result and an optimistic forward‑revenue outlook, which helped calm concerns about a slowdown in AI‑related capital spending. Nvidia shares opened down 0.5% after having jumped 8.7% the prior day, marking the first positive post‑earnings price reaction in several quarters. The AI‑driven rally lifted the S&P 500 0.7%, the Nasdaq 1.6%, and the Dow 0.2%. Enterprise‑software and cybersecurity firms also posted gains, with Salesforce.com Inc and CrowdStrike Holdings Inc posting strong advances following their own quarterly reports.

Commentary: RSM US principal and chief economist Joseph Brusuelas observed that while Warsh’s hawkish stance aligns with his long‑term default position, the lack of an immediate rate hike despite elevated inflation raises questions about central‑bank independence, especially given the Treasury’s recent yield‑capping intervention.

Authors: Ayushman Ojha and Pranav Kashyap

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