Wall St muted after Fed Chair Warsh's speech; AI rally cools

By Purvi Agarwal and Niket Nishant

Aug 28 (Reuters) - ‌Wall Street's main indexes ​were muted ​on Friday after Federal Reserve Chair Kevin Warsh reiterated his focus on bringing inflation back to the central bank's 2% target, while an AI-fueled rally from the previous session fizzled out.

Warsh's speech, his first at ‌the Fed's annual gathering in Wyoming, rounds out a busy week packed with results from corporate ⁠heavyweights such as Nvidia and Salesforce, alongside a batch of fresh economic data.

While the central bank chief has been tight-lipped about the interest rate outlook, ‌the U.S. Treasury's move to calm bond ‌markets last week has put his speech in sharper focus.

"There's been a lot of apprehension among investors about staying invested, because some of the stock moves have been uncomfortably high. The inflation data has also become pretty difficult to ​read because of the energy prices," said Yung-Shin Kung, CIO of Mast Investments.

"The bigger question for everybody is what (Treasury Secretary) Scott Bessent is looking at, and what the implications of that are for monetary policy."

In the market, chip stocks ⁠pulled back after a rally in the previous session, sparked by Nvidia's blockbuster forecast that indicated the AI-driven rally had room to run.

"For the chip companies, investors ​are hungry for a new catalyst," said Mike Reynolds, vice president of investment strategy at Glenmede.

"Markets have gotten their arms around how data center deployment will lead to potentially higher revenues. But ​the question is, what's next? And it hasn't been obvious in ‌some cases."

Traders added to bets on a September rate hike after Warsh said he felt recent inflation data did not suggest a change in trend.

Without confidence that inflation is heading clearly and ⁠with sufficient speed to the Fed's 2% goal, the central bank would have "more work to do," Warsh said in remarks prepared for delivery to the Fed's Jackson Hole economic symposium in Wyoming.

Nvidia slipped 1.3%. Marvell Technology lost 7.2% on doubts over the timing of revenue from its ⁠AI chip agreement with Alphabet's Google despite an increase to its 2027 revenue forecast.

At 10:07 a.m. ET, the Dow Jones Industrial Average rose ​36.83 points, or 0.07%, to 53,606.27, the S&P 500 lost 5.18 points, or 0.07%, to 7,725.81 and the Nasdaq Composite lost 59.66 points, or 0.22%, to 26,483.33.

Meanwhile, PayPal fell 11.5% after Bloomberg News reported on Thursday that a consortium of buyout firm Advent and payment processor Stripe ‌had decided to abandon their pursuit of the payments firm.

Gap's shares advanced 15% as the company named industry veteran Michael Francis as Old Navy's new CEO and it raised its annual ‌profit forecast.

Ulta Beauty fell 6.1% after the cosmetics retailer's comparable sales growth dropped in the second quarter.

Advancing issues outnumbered decliners by a 1.35-to-1 ⁠ratio on the NYSE, and declining issues outnumbered ‌advancers by a 1.28-to-1 ratio on the ​Nasdaq.

The S&P 500 posted three new 52-week highs and two new lows, while the Nasdaq Composite recorded 31 new highs and 51 new lows.

(Reporting by Purvi Agarwal and Niket Nishant in Bengaluru; Editing ‌by Maju Samuel)

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