U.S. equity markets ended lower on Friday as signals from Federal Reserve officials that additional interest-rate increases may be warranted weighed on risk assets, particularly technology shares.
The Nasdaq 100, which had surged the prior session on strong earnings from Nvidia and other positive corporate updates, fell 0.70% to 29,433.43 points. The index still recorded a weekly gain of 0.4%. The broader S&P 500 declined 0.25% to 7,711.76, while the Dow Jones Industrial Average slipped 0.02% to 53,559.99, ending the week up 0.7%.
Fed Governor Kevin Warsh, speaking at the Jackson Hole economic symposium, struck a hawkish tone on inflation, stating that the central bank must be convinced that core inflation is clearly and sustainably converging toward target before considering policy easing. While recent data show signs of cooling, he cautioned that the underlying trend remains unchanged. Higher rates would typically favor fixed-income assets over equities, a dynamic that disproportionately affects technology stocks due to their heavy investment in long-duration projects such as artificial intelligence.
Market expectations for a September rate hike have shifted significantly. The CME FedWatch Tool now assigns a higher probability to a 25-basis-point increase than to a hold, reversing prior expectations that had favored unchanged policy by a two-thirds majority.
Semiconductor stocks led losses in the Nasdaq 100, with Marvell Technology down 10.3% following Goldman Sachs’ mixed assessment of its quarterly results amid elevated expectations. Nvidia, which had rebounded sharply the day before, fell 4.6%. PayPal slumped 12.7% as investors reacted to the collapse of a planned takeover by Advent International and Stripe, according to sources cited by Bloomberg.
Biotech shares also retreated, with BioNTech down 8.4% after announcing the discontinuation of a Phase II trial for an mRNA colorectal cancer vaccine. The decline followed Moderna and Merck & Co’s mid-August announcement of positive results for their personalized mRNA cancer vaccine, Intismeran, for melanoma.
In contrast, apparel retailer Gap surged 12.9% after reporting second-quarter earnings that beat estimates and announcing a new CEO for its Old Navy brand.
Analysts noted that Warsh’s remarks provided limited clarity on the Fed’s intended policy path, with Elmar Völker of Landesbank Baden-Württemberg suggesting that upcoming U.S. inflation data for August—due days before the September 17-18 Federal Open Market Committee meeting—will likely prove decisive. Eric Winograd, U.S. chief economist at AllianceBernstein, added that the Fed’s growing internal divisions could introduce additional market risk.
