By Purvi Agarwal, Niket Nishant and Saeed Azhar
Aug 28 (Reuters) – Wall Street’s main indexes were lower in afternoon trade on Friday, with investors turning cautious after Federal Reserve Chair Kevin Warsh reiterated the central bank’s focus on fighting inflation.
Without confidence that inflation is heading clearly and with sufficient speed to the Fed’s 2% goal, the central bank would have “more work to do,” Warsh said in his first Jackson Hole speech.
Traders added to bets on a September rate hike after Warsh also said he felt recent inflation data did not suggest a change in trend.
Traders are now split between a rate hike and a hold in September, as they were before inflation data this month painted a mixed picture.
“Why the market is modestly reacting is he (Warsh) is very adamant that the 2% inflation target is going to remain. He is reiterating the hawkishness, but in a more of a consistent way than an incremental way,” said Mark Hackett, chief market strategist for Nationwide.
“There’s been somewhat misguided thoughts among investors that this would soften a little bit. Clearly, that’s not the case.”
Warsh’s speech rounds out a busy week packed with results from corporate heavyweights such as Nvidia and Salesforce, alongside a batch of fresh economic data.
“Warsh’s speech suggests that a hike in September is possible if the August CPI and PPI (producer price index) come in firmer, but we continue to expect that core CPI and PCE inflation will print around 0.2% in August and that the FOMC will remain on hold,” said Goldman Sachs economist Jan Hatzius in a note.
Chip stocks were mixed, pulling back from the previous session’s rally sparked by Nvidia’s blockbuster forecast that signaled the AI-driven boom had further to run.
At 1:57 p.m. the Dow Jones Industrial Average was down 43.53 points, or 0.08%, to 53,531.23, the S&P 500 lost 21.30 points, or 0.28%, to 7,709.69 and the Nasdaq Composite lost 123.02 points, or 0.46%, to 26,418.33.
Nvidia slipped 3.9%. Marvell Technology lost 9.9% on doubts over the timing of revenue from its AI chip agreement with Alphabet’s Google despite an increase to its 2027 revenue forecast.
The CBOE Volatility Index, widely known as Wall Street’s “fear gauge”, briefly touched its lowest level since December. It was last flat at 14.5.
Most megacap stocks were higher. Alphabet gained 1.7%, making the S&P 500 communication services sector the biggest boost to the index.
Salesforce extended gains from the previous session, providing support to the Dow. The stock was up 3.3%.