Ringside · Midday · Aug 28
- Warsh tells Jackson Hole the Fed's focus "should be on prices" — 2-year yield up more than 8 basis points to 4.314%
- PayPal sinks 11.60% to $54.34 after Advent and Stripe walk away from a $60.50-a-share approach
- Small caps split from the rest: Russell 2000 down 0.59% while the S&P 500 adds 0.48%
Indexes
This issue reaches you at midday rather than before the opening bell. The system that produces it was offline from Tuesday through Thursday, so this is the first Ringside since Tuesday morning, and it is being written while the session is live. Every level below carries the same timestamp: shortly after 11:25 a.m. Eastern.
Kevin Warsh used his first Jackson Hole keynote as Fed Chair to say the central bank still has "work to do" on inflation, and that "the Fed's predominant focus right now should be on prices." The speech landed hawkishly at the front end of the curve and barely at all further out. Two-year yields jumped more than 8 basis points to 4.314%, the highest since July, per CNBC; the 30-year edged lower. That combination — short rates repricing upward while long rates sit still or fall — is a bear flattener, and it is the market saying it believes Warsh about the next few meetings without changing its mind about the decade.
Equities decided this was fine. Large-cap indices are higher across the board, volatility is lower, and financial shares are among the day's better performers, with the sector fund XLF up 0.89% as asset-sensitive bank balance sheets reprice alongside the front end. The exception is small caps, where the Russell 2000 has given back 0.59% and spent the session wrestling with the 3,000 level it first closed above on June 22. Smaller companies carry more floating-rate debt and refinance more often, so a hawkish front end lands on them hardest. Europe is closing firmer, with Paris up 1.17% and Frankfurt up 0.82%.
| Index | Level | % Chg | Note |
|---|---|---|---|
| S&P 500 | 7,768.08 | +0.48% | |
| Nasdaq Composite | 26,667.01 | +0.47% | |
| Dow Jones | 53,805.03 | +0.44% | |
| Russell 2000 | 2,996.59 | -0.59% | Back under 3,000 |
| VIX | 14.22 | -2.00% |
Rates, FX, Commodities
Currency markets treated the speech as a smaller event than the bond market did. The dollar index firmed a third of a percent, which is the sort of move that follows a hawkish surprise without insisting on it. Note that the change column below is the percentage change in the yield itself, not its move in basis points: the 5-year's +1.25% means the yield moved from 4.396% to 4.451%.
| Treasury | Yield | % Chg |
|---|---|---|
| 13-week bill | 3.73% | +1.41% |
| 5-year | 4.45% | +1.25% |
| 10-year | 4.70% | +0.51% |
| 30-year | 5.19% | -0.10% |
The 2-year does not appear above. CBOE publishes the 13-week, 5-year, 10-year and 30-year series used in that table, and the 4.314% two-year figure quoted throughout this issue comes from CNBC's reporting on the speech.
| Currency | Level | % Chg |
|---|---|---|
| Dollar index | 99.50 | +0.34% |
| EUR/USD | 1.1610 | -0.38% |
| USD/JPY | 159.98 | +0.46% |
Commodities appear below as levels only. These are screen prices at the stamped time, and the crude contracts do not settle until 2:30 p.m. Eastern, so a session change figure quoted now would be measuring against a moving target. No settlement figure is claimed here.
| Commodity | Level |
|---|---|
| WTI crude | $83.17 |
| Brent crude | $88.25 |
| Gold | $4,610.70 |
| Natural gas | $2.87 |
Top Movers
Gainers
Gap (GAP) is up 13.01% to $23.50 after last night's second-quarter report. Adjusted earnings came in at $0.52 against $0.49 expected, on revenue of $3.7 billion that was essentially in line with expectations but fell 2% from a year ago. The company raised its full-year adjusted earnings forecast to $2.35-$2.45 from $2.30-$2.40, and its adjusted operating margin outlook to 7.4%-7.6% from 7.3%-7.5%. Worth noticing what did not go up: Gap also trimmed its full-year sales growth forecast to 1%-1.5% from 1%-2%. This is a margin story being rewarded as though it were a demand story.
Amazon (AMZN) has added 4.19% to $267.00 after Evercore ISI lifted its price target to $355 from $315 while keeping an Outperform rating. The firm's fourteenth annual survey of American online retail found that 57% of Alexa AI users had bought a product they were not previously aware of, which Evercore treats as the first survey evidence that conversational AI adds to Amazon's retail sales rather than merely rearranging them. No announcement from the company accompanied the move.
Meta Platforms (META) is up 2.44% to $585.05, with Apple (AAPL) up 2.25% and Alphabet (GOOGL) up 2.12%. The pattern across megacap technology today is money moving toward everything that is not the chip complex.
Losers
PayPal (PYPL) has fallen 11.60% to $54.34 after Bloomberg reported that the consortium of Advent International and Stripe abandoned its pursuit of the company. The group had offered $60.50 a share in mid-July, valuing PayPal north of $50 billion. PayPal's board considered that price inadequate, per Reuters. The stock is now trading roughly 10% below the bid it turned down, which is the risk a board accepts when it says no.
Marvell Technology (MRVL) is down 8.07% to $221.97, and the reason is not the results. Second-quarter revenue of $2.7 billion rose 37% from a year earlier, non-GAAP earnings were $0.94, and management lifted its fiscal 2027 revenue outlook to $12 billion while raising the fiscal 2028 target to $18 billion. Chief Executive Matt Murphy said AI-related bookings "remain exceptionally robust." The stock entered the report up about 184% for the year. A company whose shares have nearly tripled in eight months is priced for acceleration, and delivering it turns out not to be enough.
Nvidia (NVDA) has given back 1.77% to $223.94, trimming part of Thursday's 8.7% advance. The semiconductor fund SOXX is off 1.43%.
Drivers
- Front-end yields into the close. The 2-year at 4.314% is the highest since July, and it got there in under 90 minutes. Bank of America's Mark Cabana had argued before the speech that a purely thematic address would read dovish and push the 30-year toward 5.5%; what actually happened was the mirror image, with the long bond slightly lower and the repricing concentrated inside two years. Whether the 2-year holds above 4.30% through 4:00 p.m. Eastern is the cleanest evidence of how much of this the bond market intends to keep.
- The Russell's relationship with 3,000. The index has traded either side of that line all session, having first closed above it on June 22. Small caps have been the most direct expression of rate-cut hopes all year, and today they are the only major American equity index in the red.
- Month-end mechanics, which land Monday rather than today. August's final session is Monday the 31st, and it is that close which sets the marks index funds and balanced portfolios rebalance against. A month of equity gains generally means pension and target-date funds sell stocks and buy bonds into such a close, moving levels in the last half hour for reasons unconnected to anything said in Wyoming. Monday's bell rings at 4:00 p.m. Eastern.