U.S. stocks edged lower on Friday as comments from Federal Reserve Governor Kevin Warsh suggested the central bank may need to raise interest rates if inflation remains elevated, shifting investor preference toward bonds.
The Dow Jones Industrial Average fell 0.09% to 53,522 points one hour after the open, while the S&P 500 slipped 0.02% to 7,729. The tech-heavy Nasdaq 100 dropped 0.19% to 29,586, paring gains from the prior session when Nvidia’s upbeat outlook had lifted the index more than other benchmarks.
In a speech at the Jackson Hole economic symposium, Warsh acknowledged stronger-than-expected economic growth but emphasized the need for action if inflation fails to moderate. Investors interpreted his remarks as a signal that a rate hike could be on the table, potentially making fixed-income assets more attractive relative to equities.
Analysts at Landesbank Baden-Württemberg noted Warsh’s comments were likely aimed at addressing skepticism about his willingness to hike rates. The next Federal Reserve policy meeting, scheduled for mid-September, is now viewed with heightened uncertainty. "The U.S. inflation data for August, released just days before that meeting, will likely be decisive," said Elmar Völker of LBBW. "If core inflation does not ease, a rate hike becomes a real possibility—the decision could hinge on a razor’s edge."
Among individual stocks, Marvell Technology shares tumbled 7.2% after the chipmaker reported quarterly results that, while deemed positive by Goldman Sachs analyst James Schneider, fell short of lofty market expectations. Nvidia, which had surged the day before, retreated 1.5%.
PayPal slumped 11.2% after Advent and Stripe abandoned plans to acquire the payments company, according to people familiar with the matter cited by Bloomberg. BioNTech shares fell 8.1%, extending a losing streak after the German biotech firm halted a Phase II trial for an mRNA colorectal cancer vaccine.
In contrast, Gap surged 15% after the retailer exceeded second-quarter earnings estimates and announced a new CEO for its Old Navy brand. Affirm gained 8.7% following its quarterly results.
