US stocks: Wall Street ends lower after Fed Chair Warsh reaffirms inflation fight

On Friday, August 28, Wall Street's major indexes closed lower as investors became cautious following Federal Reserve Chair Kevin Warsh's reaffirmation of the central bank's commitment to fighting inflation. The Fed Chair's remarks during his first Jackson Hole speech increased the likelihood of a rate hike, especially as there is no certainty that inflation will move swiftly towards the Fed's 2 percent target, according to Warsh.

Traders added fuel to the speculation regarding a potential September rate hike, as Warsh also stated he believed recent inflation data did not indicate a shift in the trend. The market reacted cautiously, with traders divided between a rate hike and a hold in September, similar to their previous stance. Mark Hackett, chief market strategist for Nationwide, explained that Warsh's consistent hawkishness, rather than any incremental changes, had caused the modest market reaction.

Aditya Bhave, head of US economics research at Bank of America, cautioned that the responsibility now lies with Warsh to deliver a September rate hike, unless the August jobs and inflation data are notably weak, in which case Warsh might lose credibility. Chip stocks were impacted, with a pullback from the previous session's Nvidia rally driven by the tech giant's positive outlook on AI.

The S&P 500 fell 19.23 points (0.25%) to 7,711.76, the Nasdaq Composite dropped 138.93 points (0.52%) to 26,402.42, and the Dow Jones Industrial Average lost 9.45 points (0.02%) to 53,559.99. For the week, the S&P 500 gained 0.49%, the Nasdaq rose 0.85%, and the Dow climbed 0.53%. Nvidia experienced a 4.6% decline, while Marvell Technology dropped 10.3% due to uncertainty about revenue from its AI chip agreement with Alphabet's Google.

Most large-cap stocks had a positive performance. Alphabet rose 1.7%, making the S&P 500 communication services sector the largest contributor to the index's gain. Apple also increased by 1.6%. Salesforce extended its gains from the previous day, bolstering the Dow. PayPal experienced a 12.7% decline after a consortium led by Advent and Stripe dropped their bid for the company.

Gap's shares surged almost 13% after appointing Michael Francis as the new CEO of Old Navy and raising its annual profit forecast. Ulta Beauty declined 4.2% following a slowdown in comparable sales growth in the second quarter. The final University of Michigan's consumer sentiment survey showed a reading of 51.7, slightly below estimates of 51, according to economists polled by Reuters.

On the NYSE, declining issues outnumbered advancers by a ratio of 1.77 to 1, with 167 new highs and 107 new lows. On the Nasdaq, there were 1,494 stocks that rose and 3,272 that fell, with declining issues outnumbering advancers by a ratio of 2.19 to 1. The S&P 500 posted 5 new 52-week highs and 3 new lows, while the Nasdaq Composite recorded 51 new highs and 120 new lows.

The trading volume on US exchanges reached 15.68 billion shares, surpassing the 15.8 billion average for the entire session over the last 20 trading days.