U.S. stocks turned lower Friday afternoon after Federal Reserve Chair Kevin Warsh delivered a hawkish first Jackson Hole address, while Nvidia (NVDA -4.58%) gave back most of Thursday's post-earnings surge.
The Dow Jones Industrial Average (^DJI -0.02%) is dead flat, up 0.01% as of 1:05 p.m. ET. The S&P 500 (^GSPC -0.25%) is down 0.13% and the Nasdaq Composite (^IXIC -0.52%) has slipped 0.30%. All three were up around 0.5% earlier. Then, Warsh's words sank in and the gains melted away.
Rate-hike odds rise and stocks fade
Warsh didn't mince words in Jackson Hole, Wyoming. Inflation is running too high, price stability comes first, and the Fed needs to see prices falling "clearly and at sufficient speed." Otherwise, the Fed will need to take uncomfortable action, which might include raising interest rates again.
Translation for investors: rate cuts are not on the menu in 2026, but potential hikes are back in the conversation.
The two-year Treasury yield jumped about 0.1 point, its biggest one-day move since June, and the odds of a September rate increase firmed up from 40% to a coin flip.
Federal Reserve chairman Kevin Warsh, speaking at the White House in May 2026. Image source: Getty Images, photographer Daniel Torok.
Higher rates weigh most on richly valued growth stocks, and the day's biggest drag reflected that. Nvidia (NVDA -4.58%) fell 4%, giving back roughly half of Thursday's 8.4% earnings jump. Semiconductors fell broadly, with the iShares Semiconductor ETF (SOXX -3.20%) down 3.3%.
It's not all doom and gloom, though. Exactly half of the 30 Dow stocks are up today. Apple (AAPL +1.63%) stock rose 1.9% as the company announced significant price increases for its Apple TV and Apple One services. And the safe harbor assets people usually flock to in uncertain times were actually down today. Gold and Bitcoin (BTC -3.29%) prices both fell by 2.9%.
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Friday reset the market's expectations
The market had quietly started betting the Fed was done raising rates, despite stubborn inflation readings. Warsh, backed by Cleveland Fed President Beth Hammack's "raise rates now" comment a day earlier, just told everyone not to get too comfortable with that projection. Next month's rate-setting decision is genuinely up in the air, and the long-term economy looks murky.
The reversal also underscores how much this market depends on the rate outlook. Thursday's rally ran on Nvidia's earnings; Warsh's speech drove Friday's decline.
For long-term investors, the close of August is a reminder that strong earnings and a hawkish Fed can pull in opposite directions. Nvidia's results didn't change, but the financing-rate backdrop did. Nvidia won the week on paper, but the Fed set the tone for September.
