U.S. equities retreated on Friday as remarks by Federal Reserve policymaker Kevin Warsh signaled potential interest-rate increases, with technology shares under the heaviest pressure.
The Nasdaq 100 index fell 0.75% to 29,420 points, extending a daily decline that followed a sharp rebound on Thursday driven by Nvidia’s upbeat outlook and other positive corporate updates. Over the week, the tech-heavy benchmark still posted a gain of 0.4%. The broader S&P 500 slipped 0.22% to 7,714, while the Dow Jones Industrial Average eased 0.08% to 53,527, leaving it up 0.5% for the week.
Warsh, speaking at the Jackson Hole economic symposium in Wyoming, struck an unusually hawkish tone on inflation, stating that the Fed must be convinced core inflation is sustainably moving toward target before easing policy. “We need to be convinced that core inflation is clearly and durably on its way to target. Otherwise, we have more work to do,” he said, according to a prepared text. Recent data have shown some cooling in activity, but he indicated this has not altered the underlying inflation trajectory.
Higher interest rates typically favor lower-risk assets like bonds over equities, a dynamic that tends to weigh more heavily on technology stocks due to their reliance on long-term funding and high capital expenditures in areas such as artificial intelligence.
Market pricing shifted markedly after Warsh’s comments. The CME FedWatch tool, which tracks expected probabilities for upcoming Fed decisions, showed the likelihood of a 25-basis-point rate hike in September rising above 50%, up from less than one-third just before the speech. Analysts at Landesbank Baden-Württemberg noted that Warsh appeared intent on dispelling doubts about the Fed’s willingness to tighten policy further, increasing uncertainty ahead of the September 17–18 meeting.
The August U.S. inflation data, due for release days before the decision, are now seen as pivotal. Eric Winograd, U.S. chief economist at AllianceBernstein, said Warsh’s remarks offered “less guidance than hoped” and left the rate path unclear, while warning that growing dissent within the Fed itself could become a market risk.
Among individual stocks, Marvell Technology slumped 9.8% after Goldman Sachs analyst James Schneider maintained a positive view but noted that market expectations had been exceptionally high. Nvidia shares, which had surged 3.7% the prior day, fell 3.7% on Friday. Semiconductor peers also came under pressure.
PayPal dropped 12.5% after investors learned that private equity firm Advent International and payments processor Stripe had abandoned plans to acquire the company, according to people familiar with the matter cited by Bloomberg.
Biotech firm BioNTech fell 7.5% as it terminated a Phase II trial for an mRNA colorectal cancer vaccine. The move contrasted with positive news from Moderna and Merck & Co, which reported progress on their personalized mRNA cancer vaccine Intismeran for melanoma in mid-August.
In contrast, Gap surged 12.6% after reporting second-quarter earnings that beat expectations and announcing a new CEO for its Old Navy brand.
