U.S. Stocks Fall After Warsh Speech Boosts Bond Yields - Update

By Rob Curran

U.S. stocks edged lower after Federal Reserve Chairman Kevin Warsh indicated that the central bank's fight against inflation was not yet complete.

The Dow Jones Industrial Average slipped 9.45 points, or 0.02%, to 53559.99. The S&P 500 fell 19.23 points, or 0.25%, to 7711.76, and the tech-heavy Nasdaq Composite lost 138.93 points, or 0.52%, to 26402.42.

The yield on the policy-sensitive two-year Treasury shot up 0.118 percentage point, to 4.348%, the largest one-day gain since March. The yield on the 10-year Treasury note rose 0.050 percentage point, to 4.721%. In a phenomenon known as "curve flattening," the gain on the 30-year bond yield was more modest, causing a convergence. It rose 0.016 percentage point, to 5.207%.

In his address from Jackson Hole, Wyo., Warsh was more explicit about the central bank's plans than anticipated, noting that inflation was running above the central bank's 2% target and reiterating his commitment to fighting inflation down.

"The Fed's predominant focus right now should be on prices," Warsh said.

Odds of a rate increase at the next meeting in mid-September surged on the Fed funds futures market, rising to roughly 58%.

On Thursday, Boston Fed President Susan Collins, who isn't currently a voting member of the committee, suggested that she had come off the fence and would advocate an increase.

In one sign that inflation pressures are likely to persist, oil futures closed above $83 a barrel, down 13 cents, or 0.2%, for the session and down 4.2% for the week but up 51% from 52-week lows. After six months of war in the Middle East, the Strait of Hormuz remains largely shut.

The U.S. dollar rose against rivals. By drawing a line in the sand on inflation, Warsh may have erased doubts about his credibility on the issue and "un-debased" the dollar, "at least temporarily," said strategists at brokerage Standard Chartered, in a note to clients.

Dollar-sensitive gold futures tumbled $132.10, or 2.9%, to $4478.10 a troy ounce.

Warsh said the labor market was in generally good shape, adding that inflation was inextricably linked to economic prosperity. The University of Michigan's consumer sentiment index fell to 51.7 in August from 55.2 in July, as a rebound in gasoline prices weighed.

Artificial-intelligence leaders slid Friday after a disappointing earnings update from chip maker Marvell Technology.

Shares of Marvell declined 10%, to $216.62, despite reporting brisk second-quarter profit and revenue growth. Investors honed in on the details of a Marvell deal with Alphabet's Google, suggesting to one veteran strategist that the bar was higher than ever for AI companies after their stock-market surge.

"They're picking apart the perfect story," said Peter Mulmat, head of brokerage at IG North America's tastytrade trading platform. "They'll punish timing gaps because valuation is already stretched."

Nvidia fell 4.6%, to $217.55. Investors weighed the AI bellwether's rosy long-term revenue outlook against concerns that the capital it is raising to build data centers could grow costlier as borrowing rates rise.

"To stretch past six months or a year is a tough stretch to make [business forecasts], let alone starting to think multiple years out," Mulmat said. "They're trying to add some reason to the story and to the valuation. But you start to create a feedback loop and it gets harder and harder to meet those expectations if everything doesn't fall into line."

PayPal fell 13%, to $53.66, after Bloomberg reported that financial-technology company Stripe and investment firm Advent International were walking away from an offer to buy the online-payment firm.

Chevron and other U.S. energy companies neared deals to invest billions of dollars in Venezuela's oil fields, positioning President Trump for a win after months of slow negotiations.

Write to Rob Curran at rob.curran@wsj.com

(END) Dow Jones Newswires

August 28, 2026 16:56 ET (20:56 GMT)