A Hawkish Fed Speech Turns a Green Morning Red

Federal Reserve Chair Kevin Warsh delivered a hawkish speech at Jackson Hole that erased morning equity gains, signaling rate cuts are unlikely in 2026 and leaving rate hikes on the table. The S&P 500 closed down 0.13% while the Nasdaq fell 0.30%. NVDA bore the brunt of selling pressure among growth names as investors repriced expectations for monetary policy.

The two-year Treasury yield jumped sharply in response to Warsh's remarks. September rate hike odds climbed to approximately 50%, reflecting a material shift in Fed policy expectations. The reversal caught traders positioned for continued dovish pivot off guard, with tech and growth equities absorbing the steepest losses.

Warsh's speech marks a departure from market consensus that had priced in multiple cuts through 2026. The Fed chair's comments suggest inflation concerns remain elevated enough to justify further tightening, despite recent economic data pointing to cooling price pressures.