U.S. stocks pulled back on Friday, August 28, as Federal Reserve Chair Kevin Warsh delivered his first Jackson Hole keynote since taking over the central bank, striking a notably hawkish tone that reset expectations for the path of interest rates. The S&P 500 slipped 0.25% to 7,711.76 and the Nasdaq Composite fell 0.52% to 26,402.42, while the Dow Jones Industrial Average was essentially flat, down 9.45 points to 53,559.99. Despite the Friday retreat, all three benchmarks closed out a winning week, with the session's tone driven almost entirely by how traders parsed the Fed chair's remarks rather than by fresh corporate news.

Warsh Warns the Fed Still Has Work to Do

In his first high-profile address as Fed chair, Warsh told the Jackson Hole symposium that inflation, running at 3.4%, remains too far above the central bank's 2% target. He acknowledged that recent readings have cooled somewhat but said they "do not tell me that underlying trends have meaningfully improved." Warsh added that the Fed "has more work to do" and left open the possibility that its next move could be a rate increase rather than a cut, a stance that puts him at odds with President Trump's repeated calls for lower borrowing costs. Investors had widely expected a more balanced message, and the tougher framing prompted a swift repricing of rate expectations across trading desks.

Treasury Yields Split Across the Curve

Bond markets reacted unevenly to the hawkish tone. The 2-year Treasury yield, most sensitive to near-term Fed policy, jumped more than 6 basis points to 4.298% as traders priced in reduced odds of near-term easing. Longer-dated debt moved the other way, with the 30-year bond yield easing 2 basis points to 5.168% after weeks of pressure near multi-decade highs, while the benchmark 10-year yield was little changed at 4.676%. The split reflected markets separating near-term policy risk, where a hike now looks more plausible, from the longer-run inflation outlook, where investors saw the speech as a step toward credibility.

Chip Stocks Retreat After Nvidia's Post-Earnings Surge

Technology shares gave back some of the week's gains, with Nvidia and Intel among the session's laggards. The pullback followed Nvidia's blowout quarterly report, released after Wednesday's close, which showed second-quarter revenue of $96.22 billion and earnings of $2.22 per share, both above estimates, along with guidance for roughly 70% revenue growth in fiscal 2028. The stock had surged 8.7% on Thursday and helped drive the Nasdaq up 1.6% that session, but Friday's profit-taking in semiconductor names, compounded by the rate-sensitive tone from Jackson Hole, left the Nasdaq as the day's weakest major index.

A Winning Week Despite the Friday Wobble

For the week, the S&P 500 advanced 0.5%, the Nasdaq gained 0.9% and the Dow climbed 0.5%, marking Wall Street's first winning week in three. Communication Services and Technology led sector performance, up 1.4% and 1.3% respectively, aided earlier in the week by Nvidia's results. Gold held steady near $4,600 an ounce heading into Warsh's speech, with investors reluctant to build large positions ahead of a keynote carrying implications for the rate outlook into the autumn and for how the Fed balances inflation risk against political pressure for lower rates.

Daily market analysis by BCM Markets.