The Dow Jones Industrial Average rose 0.54%, while the S&P 500 gained 0.16%. The Nasdaq Composite slipped 0.31%, pressured by losses in semiconductor and parts of the technology sector.
Warsh reiterated the Fed’s commitment to returning inflation to its 2% target, but said price pressures had moderated, offering some reassurance to investors concerned about further rate hikes. However, he made clear the central bank would not signal its policy trajectory in advance, reinforcing a shift away from forward guidance and towards a more data-dependent approach.
He also said inflation remained “too high,” stressing that policymakers would stay focused on restoring price stability. Traders continue to expect at least one more rate hike this year, according to LSEG data.
In a notable structural move, Warsh outlined the creation of five Fed task forces reviewing communications, the central bank balance sheet, economic data usage, productivity and jobs, and the inflation framework. He said staffing details, including outside experts and non-U.S. participants, would be announced soon, and emphasised that the groups would be advisory in nature, requiring approval from Fed leadership before any policy changes.
The remarks came alongside mixed economic signals. U.S. manufacturing activity slowed in June but remained solid, according to the Institute for Supply Management, while the labour market continued to show resilience. That combination, analysts said, supports a cautious Fed stance as inflation dynamics evolve.
Oil prices added to the disinflation narrative, with Brent crude falling 2.1%, easing concerns about energy-driven price pressures.
“A broadening recovery across manufacturing but not employment supports a cautious stance as price pressures evolve,” said Richard de Chazal, macro analyst at William Blair.
Geopolitical uncertainty also lingered, with ongoing tensions involving the U.S. and Iran keeping markets alert to potential disruptions in the Middle East, even as diplomatic contacts continued in limited form.
Sector-wise, communication services led gains with a 2.5% rise, while information technology fell 1.3%. Semiconductors dropped 5.3%, while software stocks gained 3.8%.
Among individual movers, Meta Platforms surged 9.8% after reports it is building a cloud business to monetise excess AI computing capacity. Shutterstock fell nearly 29% after abandoning its planned merger with Getty Images, while Kroger slipped about 1% following news of a $1.65 billion acquisition of regional supermarket chain Giant Eagle.
Market breadth remained positive, with advancing stocks outpacing decliners on both the NYSE and Nasdaq. Neither benchmark index posted new 52-week highs or lows.
Despite mid-week volatility, equities remain near strong levels after a robust second quarter. The S&P 500 and Nasdaq recorded their best quarterly performance since 2020, while the Dow posted its strongest quarterly gain since 2022.
Investors now turn to Thursday’s U.S. nonfarm payrolls report for June, which is expected to provide fresh clues on labour market strength and the Fed’s next policy direction.
For now, markets are balancing easing inflation signals against policy uncertainty — with Warsh’s comments offering short-term relief, but little clarity on the path ahead.
