NEW YORK – Wall Street’s main indexes ended lower on Aug 28, with investors turning cautious after Federal Reserve Chair Kevin Warsh reiterated the central bank’s focus on fighting inflation, increasing prospects for a rate hike.
Without confidence that inflation is heading clearly and with sufficient speed to the Fed’s 2 per cent goal, the central bank would have “more work to do,” Warsh said in his first Jackson Hole speech.
Traders added to bets on a September rate hike after Warsh also said he felt recent inflation data did not suggest a change in trend.
Traders are now split between a rate hike and a hold in September, as they were before inflation data in August painted a mixed picture.
“Why the market is modestly reacting is he (Warsh) is very adamant that the 2 per cent inflation target is going to remain. He is reiterating the hawkishness, but in a more of a consistent way than an incremental way,” said Mark Hackett, chief market strategist for Nationwide.
“There’s been somewhat misguided thoughts among investors that this would soften a little bit. Clearly, that’s not the case.”
Warsh’s speech rounds out a busy week packed with results from corporate heavyweights such as Nvidia and Salesforce, alongside a batch of fresh economic data.
“We were encouraged by Warsh’s speech. But talk is cheap,” said Aditya Bhave, head of US economics research at Bank of America, in a note. He said the onus was on Warsh to deliver a rate hike in September, unless the August jobs and inflation data are very soft.
Otherwise, Bhave said, Warsh would probably lose credibility. Chip stocks were mixed, pulling back from the previous session’s rally sparked by Nvidia’s blockbuster forecast that signalled the AI-driven boom had further to run.
The S&P 500 lost 19.23 points, or 0.25 per cent, to 7,711.76 and the Nasdaq Composite lost 138.93 points, or 0.52 per cent, to 26,402.42. The Dow Jones Industrial Average closed 9.45 points, or 0.02 per cent, lower to 53,559.99.
For the week, the S&P 500 gained 0.49 per cent, the Nasdaq rose 0.85 per cent, and the Dow climbed 0.53 per cent.
Market heavyweight Nvidia slipped 4.6 per cent. Marvell Technology tumbled 10.3 per cent on doubts over the timing of revenue from its AI chip agreement with Alphabet’s Google, even though Marvell boosted its 2027 revenue forecast.
Most megacap stocks were higher. Alphabet gained 1.7 per cent, making the S&P 500 communication services sector the biggest boost to the index.
Apple also rose 1.6 per cent. Salesforce extended gains from the previous session, providing support to the Dow. It closed 1.6 per cent higher. PayPal fell 12.7 per cent the day after Bloomberg News reported that a consortium of buyout firm Advent and payment processor Stripe had decided to abandon their pursuit of the payments firm.
Gap’s shares advanced almost 13 per cent as the retailer named industry veteran Michael Francis as Old Navy’s new CEO and raised its annual profit forecast.
Ulta Beauty fell 4.2 per cent after the cosmetics retailer’s comparable sales growth dropped in the second quarter.
Separately, the final reading of the University of Michigan’s consumer sentiment survey stood at 51.7, compared with estimates of 51, according to economists polled by Reuters. Declining issues outnumbered advancers by a 1.77-to-1 ratio on the NYSE.
There were 167 new highs and 107 new lows on the NYSE. On the Nasdaq, 1,494 stocks rose and 3,272 fell as declining issues outnumbered advancers by a 2.19-to-1 ratio.
The S&P 500 posted 5 new 52-week highs and 3 new lows while the Nasdaq Composite recorded 51 new highs and 120 new lows. Volume on US exchanges was 15.68 billion shares, compared with the 15.8 billion average for the full session over the last 20 trading days. REUTERS
