US MARKET CLOSE | Three Major Indexes Fall as Warsh Flags Inflation Concerns; September Rate-Hike Odds Jump to 57%

Wall Street's three major indexes closed lower on Friday, weighed down by semiconductor stocks including Nvidia and Intel, which dragged the Nasdaq Composite lower, according to Sina Finance. The declines came after Federal Reserve Chair Kevin Warsh voiced concern about the current inflation trend, pressuring the S&P 500 to a lower Friday close even as the index held onto a weekly gain. The Dow Jones Industrial Average slipped 9.45 points, or 0.02%, to 53,559.99; the S&P 500 fell 19.23 points, or 0.25%, to 7,711.76; and the Nasdaq Composite dropped 138.93 points, or 0.52%, to 26,402.42. For the week, the S&P 500 rose 0.5%, the Nasdaq Composite gained 0.9%, and the Dow climbed 0.5%, marking its first weekly advance in about three weeks. Speaking at the annual central bank symposium in Jackson Hole, Wyoming, Warsh said that although this summer's personal consumption expenditures (PCE) price index and consumer price index (CPI) data came in better than expected, in his view this did not represent a substantive improvement in the underlying inflation trend. He added that the Fed must be convinced core inflation is falling clearly and quickly enough toward the policy target, and that if not, 'we still have work to do.' According to CME Group's FedWatch tool, federal funds futures traders' odds of a Fed rate hike in September rose to about 57% on Friday, up from just 35.4% the prior day. Following Warsh's remarks, short-term Treasury yields rose, while long-term yields were largely flat; long-term yields, which affect borrowing costs across the economy, have been a key market concern recently. Bill Birmingham, managing director at REX Financial, said the speech sent a very hawkish signal, both a message to markets and an overall stance that some of the Fed's conduct over roughly the past 40 years could have been more rigorous. Birmingham added that Warsh's comments on the composition of CPI in particular showed he is actively working to build internal consensus at the Fed to push a rate hike through. Investors also digested a batch of corporate earnings. Gap posted mixed quarterly results, but its shares surged 13% after the retailer appointed a new chief executive for its struggling Old Navy brand. Marvell Technology fell about 10% after issuing non-GAAP gross margin guidance for the quarter that missed market expectations.