Markets pulled back on Friday after Federal Reserve Chair Kevin Warsh delivered his first Jackson Hole speech, signaling that more interest rate hikes could be on the way.
FED WARSH AT JACKSON HOLE (Summary):
On policy:
• He gave no timetable for a rate hike and said the speech should not be viewed as forward guidance or a formal reaction function
• Short-term interest rates remain the Fed’s main policy tool
• A “good majority” at the July… pic.twitter.com/pUZUOUa0Lj
— Wall St Engine (@wallstengine) August 28, 2026
Warsh said the Fed “will have work to do” if inflation does not return to its 2% target. He also acknowledged that financial conditions do not look restrictive right now.
That was enough to send markets lower and push rate hike expectations sharply higher.
Before the speech, traders saw a 35.4% chance of a September rate hike. After it, that number jumped to over 57%, according to CME Group’s FedWatch tool.
The 2-year Treasury yield, which tracks Fed rate expectations closely, rose nearly 13 basis points to 4.36%. The 10-year yield climbed to 4.728% and the 30-year hit 5.21%.
The dollar also surged. The dollar index rose 0.61% to 99.71, its biggest single-day gain in around two and a half months. The euro fell to $1.158.
Tech stocks and small-cap companies took the hardest hit. These types of stocks tend to suffer when rates rise because borrowing costs go up and future earnings are worth less today.
The Nasdaq Composite fell 138.93 points, or 0.52%, to close at 26,402. The S&P 500 dropped 19.23 points, or 0.25%, to 7,711. The Dow Jones fell just 9.45 points, ending nearly flat at 53,559.
The Russell 2000, which tracks smaller companies, was the worst performer, dropping 1.4%.
Nvidia fell on Friday after surging the day before on strong earnings results. Analysts at Mizuho said the Jackson Hole remarks pushed rate hike expectations higher, which historically hurts momentum tech stocks.
Gold dropped 3.19% and silver fell 4.15% as the stronger dollar weighed on commodities.
Bitcoin was not spared. It fell 2.77% on the day as the rate hike news hit risk assets broadly.
Crypto tends to move with risk sentiment, and higher interest rates generally push investors away from speculative assets.
European stocks held up better. The STOXX 600 index finished up 0.51% before the full impact of Warsh’s remarks filtered through.
The next major data points for markets will be the August jobs report next week and the August inflation data, which will give clearer signals on where interest rates are headed.
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