NEW YORK (AP) — The U.S. stock market is holding relatively steady Friday after the head of the Federal Reserve said once again in a highly anticipated speech before global investors and central bankers that inflation remains too high.
The S&P 500 was virtually unchanged in morning trading. The Dow Jones Industrial Average was up 59 points, or 0.1%, as of 10:10 a.m. Eastern time, and the Nasdaq composite was 0.2% lower.
The bond market was showing more of a reaction, as yields zigzagged in the minutes immediately after the text of Kevin Warsh's speech was released. It's his first time speaking as chairman of the Fed at an annual economic symposium in Jackson Hole, Wyoming, which has been the setting for major Fed policy announcements in the past.
Warsh again was adamant that he wants to give financial markets fewer clues about what the Fed plans to do with interest rates to fulfill its job of keeping inflation low and the job market strong. He has said he wants markets to react to what incoming data says about the economy and inflation rather than what the Fed says.
But he was under pressure to offer more clarity about whether his tough talk about getting high inflation back down to the Fed’s 2% goal is just that, or whether the Fed plans to back it up with action. The Fed has kept its main interest rate steady since December, even though inflation remains well above its target.
Higher rates could help improve inflation, but they would also slow the economy and hurt prices for investments. And President Donald Trump, who appointed Warsh, has been vocal about wanting interest rates to be lower rather than higher.
The U.S. Treasury Department made an unusual move last week to intervene in the bond market to get yields lower on longer-term Treasurys, though analysts said it will likely have only a limited effect.
Warsh said in his speech Friday that “short-term interest rates are the predominant tool” to do the Fed's twin jobs of keeping inflation under control and the job market strong. He also said, “I would be hard pressed to describe broad financial conditions as restrictive,” implying that short-term interest rates are not high enough to tamp down the economy and inflation.
The yield on the two-year Treasury, which closely tracks expectations for what the Fed will do with its federal funds rate, jumped to 4.29% from 4.22% just before the speech.
Longer-term yields, which move more on expectations of what the economy and inflation will do in upcoming years, were mixed. The 10-year Treasury yield rose to 4.69% from 4.67% late Thursday but was still roughly where it was in the morning before the speech.
The 30-year yield fell to 5.17% from 5.19% late Thursday.
On Wall Street, Gap jumped 15.4% after the retailer reported stronger profit for the latest quarter than analysts expected. It also said Michael Francis, an industry veteran who began his career on the retail sales floor, will take over as head of its Old Navy stores.
Marvell Technology weighed on the market and fell 6.9% even though the chip company reported profit and revenue for the latest quarter that edged past analysts’ expectations. CEO Matt Murphy said its business related to artificial-intelligence technology is strong, and it raised its forecasts for upcoming revenue growth.
But analysts said much of that optimism may have already been baked into Marvell’s stock price, which came into the day with a surge of 184% for the year so far.
In stock markets abroad, indexes rose across much of Europe following a mixed finish in Asia. South Korea’s Kospi fell 1.8%, and France’s CAC 40 rose 1% for two of the world’s bigger moves.
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AP Business Writers Michelle Chapman and Elaine Kurtenbach contributed to this report.
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