Warsh's Hawkish Speech Sends Stocks Reeling

A hawkish speech by Federal Reserve Chair Kevin Warsh sent US stocks tumbling on Friday afternoon.

The market had been quietly betting that the Fed was done raising rates, despite stubborn inflation readings. However, Warsh made it clear in his first Jackson Hole address that price stability comes first and the Fed needs to see prices falling 'clearly and at sufficient speed.' If not, the Fed will need to take uncomfortable action, including raising interest rates again.

Nvidia's earnings-driven rally on Thursday was short-lived as the company's stock fell 4%, giving back roughly half of its 8.4% gains from the previous day. The iShares Semiconductor ETF also dropped 3.3%. On the other hand, Apple's stock rose 1.9% after the company announced significant price increases for its Apple TV and Apple One services.

The Fed's hawkish tone weighed heavily on richly valued growth stocks, but not all assets were affected equally. Gold and Bitcoin prices both fell by 2.9%. The two-year Treasury yield jumped about 0.1 point, its biggest one-day move since June, and the odds of a September rate increase firmed up from 40% to a coin flip.