U.S. stocks lost momentum on Friday as investors digested Federal Reserve Chair Kevin Warsh’s first Jackson Hole keynote and recalibrated expectations for interest rates. The S&P 500 slipped about 0.2%, while the tech-heavy Nasdaq Composite fell roughly 0.4% after climbing as much as 0.5% earlier in the session. The Dow Jones Industrial Average hovered around the flat line.
The reversal came as Warsh emphasized that inflation remains above the Fed’s target and said price stability should be the central bank’s predominant focus. Short-term Treasury yields jumped following the remarks, tempering enthusiasm from a strong earnings season that has powered technology stocks and kept the broader market near record levels.
Market Movers:
- Elastic (ESTC) +19%: Shares surged after fiscal first-quarter revenue increased 15.2% year over year and the software company delivered better-than-expected results. Elastic also raised its fiscal 2027 outlook, forecasting revenue of $1.998 billion to $2.010 billion and adjusted EPS of $3.29 to $3.37.
- Gap (GAP) +15%: Shares jumped after the retailer raised its full-year profit outlook as improving margins helped offset uneven sales across its brands. Comparable sales climbed 10% at Gap and 3% at Banana Republic but declined 4% at Old Navy and 12% at Athleta.
- Affirm (AFRM) +9%: Shares rallied after the buy now, pay later company reported strong fiscal fourth-quarter results and issued an upbeat outlook. Quarterly gross merchandise volume reached $14.1 billion, while active consumers increased 20% to 27.8 million and adjusted operating margin expanded to 30.3%.
- PayPal (PYPL) -12%: Shares plunged after reports that Stripe and private equity firm Advent had abandoned a potential takeover valued at more than $50 billion. The possibility of a deal had fueled hopes for a substantial acquisition premium, making its apparent collapse a sharp disappointment for investors.
- Rubrik (RBRK) -8%: Shares fell despite quarterly revenue jumping 38% and the cybersecurity company raising its full-year outlook. The negative reaction suggested expectations had climbed even faster than the company’s results, despite continued growth in large customers and demand for AI-related cyber resilience.
- Marvell Technology (MRVL) -7%: Shares dropped even after the semiconductor company posted record quarterly revenue of $2.74 billion, up 37% year over year, and delivered better-than-expected guidance. Data center revenue surged 46% to $2.17 billion, but investors appeared to have expected an even stronger beat following Nvidia’s blockbuster results.
Warsh Puts Inflation Back at Center Stage
Wall Street’s attention shifted from corporate earnings to monetary policy after Warsh delivered his first Jackson Hole address as Fed chair. He acknowledged the resilience of the U.S. economy but made clear that inflation remains the central bank’s immediate concern.
The comments were interpreted as mildly hawkish, particularly after the latest PCE data showed headline inflation running at 3.7% annually and core inflation at 3.3%. Two-year Treasury yields jumped roughly 8 basis points during the speech, signaling that traders were repricing expectations for the near-term path of monetary policy. That reaction helped erase earlier stock-market gains. Higher short-term rates are particularly important for growth stocks, where valuations depend heavily on expectations for future earnings and borrowing costs.
Earnings Strength Meets a Higher Wall Street Bar
The latest batch of corporate results offered another reminder that beating estimates is not always enough. Marvell and Rubrik both delivered strong numbers and optimistic forecasts, yet their shares declined as investors demanded more from companies tied to some of the market’s hottest themes. That stands in contrast to Thursday’s powerful rallies in Nvidia, Salesforce, CrowdStrike and Okta. Those companies delivered results strong enough to reinforce enthusiasm surrounding AI infrastructure, enterprise software and cybersecurity.
Friday’s moves suggest the market may be becoming increasingly selective. With valuations elevated across parts of technology, companies may need not only to beat expectations but significantly exceed them to keep their stocks moving higher.
Consumers Continue to Send Mixed Signals
Outside technology, investors received another look at the health of the consumer. An upward revision to the University of Michigan’s consumer sentiment reading offered some encouragement after recent economic data pointed to pressure from elevated living costs and borrowing rates. Gap’s results provided another mixed signal.
Strength at its namesake brand and Banana Republic helped support the company’s improved profit outlook, but weakness at Old Navy and particularly Athleta showed that consumer spending remains uneven. The broader picture remains one of resilience rather than outright strength — a backdrop that could complicate the Fed’s decision-making if inflation remains elevated while parts of the consumer economy soften.
Looking Ahead
Investors will enter next week balancing two powerful forces: strong corporate earnings and a Federal Reserve that appears unwilling to declare victory over inflation. Warsh’s Jackson Hole remarks reinforced the possibility that interest rates could remain restrictive for longer than some investors hoped, keeping Treasury yields firmly in focus. At the same time, earnings continue to provide meaningful support for stocks, particularly across AI and technology. With major indexes near record territory, the question heading into September is whether earnings growth can remain strong enough to overcome elevated rates, geopolitical uncertainty, and increasingly demanding valuations.