Alex Eule
Warsh's Reality. In his first Jackson Hole speech as chairman of the Federal Reserve, Kevin Warsh reminded the market that he isn't just paying lip service to rising prices. Warsh called out "65 months of sustained, elevated inflation" and noted that two years of progress in bringing down price growth has been "modest."
For investors averse to rate hikes, this comment from Warsh was the most bracing: "While this summer's PCE and CPI readings were better than expected, they do not tell me that underlying trends have meaningfully improved."
Following Warsh's speech, bond yields rose as odds for a September hike solidified. By late Friday afternoon, the futures market had priced in a 58% chance of a quarter-point rate increase at the Fed's September meeting, up from 35% yesterday.
Stocks, particularly rate-sensitive tech names, fell on the news. The Nasdaq Composite finished Friday down 0.5%, while the S&P 500 fell 0.25%.
Shares of AI-enabler Nvidia sank 4.6%, erasing much of the chipmaker's post-earnings gain just one day earlier.
To be sure, no one seems worried about the overall economy, including the Fed chair. "For my part, today I am impressed by the overall performance of the economy, which appears to have strengthened," Warsh said in his Jackson Hole speech. "One indicator of strength is how well an economy holds up to shocks. On that score, both Main Street and Wall Street have been remarkably resilient."
Put corporations in that same bucket. With 97% of companies in the S&P 500 now having reported their second-quarter results, the earnings growth rate for the quarter is 52%. That's the highest level since the Covid rebound in the second quarter of 2021. At the end of the day, earnings drive stocks. If the numbers remain strong, rate hikes won't matter much. Stocks will continue heading higher. Watch our TV show on Fox Business Saturday and Sunday at 10:30 a.m. ET. This week, Bank of America strategist Savita Subramanian on what's next for the Fed and why dividend stocks look attractive. Plus, the end of the SaaSpocalypse.
Barron's newsletter portfolio is growing. Barron's Global Signals is a premium weekly newsletter devoted to helping investors navigate volatility with confidence. Each week we connect how global risk, policy shifts and international developments impact your portfolio. You can subscribe to Barron's Global Signals here.
The Hot Stock: Workday +5.8% The Biggest Loser: PayPal Holdings -12.7%
Best Sector: Consumer Discretionary +1.7% Worst Sector: Technology -1.3%
This Weekend's Magazine
The Calendar
Next week, Nvidia rival Broadcom gets its turn on center stage when it reports third-quarter fiscal-2026 results. Other companies in the artificial-intelligence ecosystem announcing earnings include Dell Technologies on Tuesday, Hewlett Packard Enterprise on Wednesday, and Ciena on Thursday.
The major economic data release next week is the jobs report from the Bureau of Labor Statistics on Friday. That data and the consumer price index, released a week later, will influence the Federal Open Market Committee's next move on interest rates.
-Dan Lam
What We're Reading Today
Nvidia Stock Is Starting to Look a Lot Like 2010s Apple
Warren Buffett Turns 96 on Sunday. His Final Berkshire Masterpiece Isn't Winning Over Wall Street.
Warsh Is Asking the Right Questions About AI. The Answers Will Have to Wait.
Exclusive: Death of Alleged Scammer Targeting NFL Players Is Now Being Investigated as a Crime
And this weekend's cover story: Is the AI Capex Bubble About to Burst? What 250 Years of Market History Tell Us.
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