Markets ended the week on a surprisingly upbeat note, even as expectations for higher US interest rates climbed sharply. Federal Reserve Chair Kevin Warsh’s first Jackson Hole address put stubborn inflation back at the centre of the conversation and prompted traders to rethink September. Yet Wall Street kept moving higher, helped by continued strength in technology stocks.
Rate hike odds jump
Warsh struck a hawkish tone at the Jackson Hole Economic Symposium, highlighting concerns that inflation remains above the Federal Reserve’s target. Traders quickly responded, with the CME FedWatch Tool putting the probability of a September rate increase at 55.7%, up sharply from 35.4% a day earlier.
The probability of rates staying unchanged for the rest of 2026 also dropped from 25.9% to 14.8%. The shift came ahead of the Federal Open Market Committee‘s September 15-16 meeting, where policymakers will decide their next move. Treasury markets reflected the changing expectations. Two-year yields climbed to 4.3%, while the 10-year yield slipped to 4.67% and the 30-year yield eased to 5.16%.
Longer-term borrowing costs had already reached multiyear highs earlier in August as investors weighed persistent inflation against concerns about rising federal debt. Warsh’s remarks now give markets another reason to watch incoming economic data closely before September’s decision.
Tech keeps stocks higher
Wall Street nevertheless finished Friday in positive territory. The Dow Jones Industrial Average gained around 0.37%, while the S&P 500 rose 0.49% and the Nasdaq Composite added 0.57%. Technology stocks provided much of the support after Nvidia’s upbeat long-term outlook for artificial intelligence demand helped lift sentiment a day earlier.
Salesforce also entered Friday on strong footing after recording its biggest one-day percentage gain since 2020, easing concerns about enterprise software demand. Investors received another economic signal from the University of Michigan’s consumer sentiment data on Friday. Despite growing expectations that another rate hike could arrive soon, all three major US indexes ultimately closed the session higher.
