U.S. Stocks Seeing Considerable Volatility Following Warsh Speech

(RTTNews) - Following the strength seen in the previous session, stocks have seen considerable volatility over the course of the trading day on Friday. The major averages have spent the day swinging wildly back and forth across the unchanged line.

Currently, the major averages are narrowly mixed. While the Nasdaq is down 49.14 points or 0.2 percent at 26,492.22, the S&P 500 is up 0.57 points or less than a tenth of a percent at 7,731.56 and the Dow is up 108.43 points or 0.2 percent at 53,677.87.

The volatility on Wall Street comes as traders digest Federal Reserve Chairman Kevin Warsh's highly anticipated debut speech as the head of the central bank at the Jackson Hole economic symposium.

As widely expected, Warsh began his remarks by highlighting his aversion to providing "forward guidance," noting his "long-time discomfort with early pronouncements of future policy decisions."

Warsh argued that oversharing policy deliberations and overcommitting to future decisions can lead markets, businesses, and households astray.

However, Warsh's comments about the current state of the economy may have provided some insight into his views about the outlook for interest rates.

The Fed chief noted people may well be concerned about possible future labor disruptions but said he believes labor markets are currently consistent with full employment.

Instead, Warsh said the numbers are more concerning with regard to the price-stability side of the Fed's dual mandate, with the annual rate of growth by the central bank's preferred measure of inflation standing at 3.7 percent

"None of these measures are perfect, but they all tell a similar story: Inflation is running above our 2 percent target," Warsh said. "So the Fed's predominant focus right now should be on prices."

He added, "We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do. That's our job . . . our mandate . . . and our charge to keep."

Following Warsh's remarks, the chances the Fed will raise interest rates by a quarter point next month have jumped to 59.5 percent from just 35.4 percent yesterday, according to CME Group's FedWatch Tool.

Treasury yields have also moved to the upside in reaction to the Fed chief's speech, contributing to a pullback by tech stocks.

Sector News

While most of the major sectors are showing only modest moves on the day, semiconductor stocks are pulling back sharply after surging in the previous session.

Reflecting the weakness in the sector, the Philadelphia Semiconductor Index has plunged by 3.2 percent after jumping by 2.3 percent on Thursday.

Gold stocks are also under pressure amid a steep drop by the price of the precious metal, dragging the NYSE Arca Gold Bugs Index down by 3.2 percent.

Networking, biotechnology and computer hardware stocks are also seeing significant weakness, while retail stocks have shown a strong move to the upside.

Shares of Gap (GPS) have spiked by 13.4 percent after the clothing and accessories retailer reported better than expected second quarter earnings and announced the appointment of Michael Francis as President and Chief Executive Officer of Old Navy.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Friday. Japan's Nikkei 225 Index climbed by 0.4 percent, while China's Shanghai Composite Index edged down by 0.1 percent and South Korea's Kospi slump by 1.8 percent.

Meanwhile, the major European markets have all moved to the upside on the day. While the French CAC 40 Index is up by 1 percent, the German DAX Index is up by 0.8 percent and the U.K.'s FTSE 100 Index is up by 0.3 percent.

In the bond market, treasuries have come under pressure in reaction to Warsh's remarks. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 3.2 basis points at 4.704 percent.