Short-term Treasury yields increased following Federal Reserve Chairman Kevin Warsh's speech at the Jackson Hole symposium, where he emphasized the central bank's resolve to control inflation. The two-year note yield rose by 1.21 basis points to 4.236%, while the 10-year Treasury yield advanced by 1.22 basis points to 4.676%, and the 30-year bond yield gained 0.91 basis points to 5.1941%. This move in yields reflects investor anticipation of a potentially hawkish stance from Warsh, with futures markets pricing in a one-quarter-point hike by year-end and a roughly one-third chance of a September increase. Analysts like Torsten Slok of Apollo Global Management noted the speech could have a hawkish flavor, while Christopher Hodge, chief US economist for Natixis, expected Warsh to focus on the supply side of the economy.
Despite the rise in yields, stock markets saw gains, particularly in the technology sector. The S&P 500 increased by 55.29 points (0.72%) to 7,730.99, and the Nasdaq Composite climbed by 411.16 points (1.57%) to 26,541.35. This tech rally was largely driven by Nvidia's robust forecast, with the company's shares jumping 8.7% after predicting approximately 70% revenue growth for its upcoming fiscal year. Other software firms like Salesforce and CrowdStrike also saw significant surges, rising 22.6% and 20.5% respectively, due to strong earnings and outlooks. The Dow Jones Industrial Average also rose by 105.56 points (0.20%) to 53,569.44.
Investors were keenly focused on Warsh's speech for clues on interest rate policy, although Fed officials, including Jeff Schmid and Beth Hammack, had already expressed concerns about inflation. Federal policymakers had previously left the federal funds rate unchanged at 3.5% to 3.75%. The dollar remained largely unchanged as market participants awaited further guidance. The Treasury also announced increased buybacks of long-dated debt following recent yield increases, and jobless claims declined from the previous week, indicating a mixed economic picture. A $44 billion auction of seven-year notes drew solid demand, with some traders not expecting a rate move before December, as suggested by a purchase of 45,000 October federal-funds futures contracts.
