Warsh Reaffirms Hawkish Stance, US Stocks Tumble
US stocks closed lower on Friday after Federal Reserve Chair Kevin Warsh reaffirmed the central bank's commitment to keeping inflation at its 2% target. This move disappointed investors who had hoped for a more dovish stance, leading them to reassess expectations for a September rate hike.
The S&P 500 fell 19.94 points, or 0.26%, to 7,711.05, while the Nasdaq Composite dropped 140.79 points, or 0.53%, to 26,400.56. The Dow Jones Industrial Average slipped 11.06 points, or 0.02%, to 53,558.38.
Warsh's speech at Jackson Hole was seen as a reiteration of the Fed's hawkish stance on inflation, which pushed traders to increase bets on a rate hike next month. Mark Hackett, chief market strategist for Nationwide, said Warsh is 'very adamant' that the 2% inflation target will remain.
However, not everyone was convinced. Aditya Bhave, head of U.S. economics research at Bank of America, said Warsh would need to deliver a rate hike in September unless August jobs and inflation data came in very soft.