The 10-year rose to 4.73%. September hike odds moved to 50%. The goods deficit hit $118.8 billion. Sports contracts took a Ninth Circuit loss.
Warsh did not kill the week. He changed the rate path.
The Nasdaq fell 0.54%. The S&P lost 0.28%. The Dow slipped 14 points. The VIX eased 0.28% to 14.47.
The 10-year yield rose to 1.24%. Oil slipped 0.10% to $83.45. Gold fell 3.19%. The euro dropped to 1.159.
That is the surface.
Underneath, Friday was a Fed day.
Warsh used Jackson Hole to say inflation is still too high. He did not give a date. He did not give a clear rule. He said the Fed has more work to do if inflation does not move toward 2% clearly and fast enough.
Markets heard the part that mattered.
The September meeting is live again.
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The two-year got the speech first.
Warsh said recent inflation readings do not show real improvement. He said the economy appears to have strengthened, helped by consumer spending, business spending and AI momentum. He also framed the labor slowdown as more supply than demand.
That is not a cut setup.
The 2-year yield jumped nearly 8 basis points to 4.31%. The 10-year rose to 4.73%. Stocks fell, but not hard. Nvidia (NVDA) cooled after its rally. Marvell (MRVL) fell about 10% after weak margin guidance. Gap (GAP) rose nearly 13% after naming a new Old Navy CEO.
Prediction markets moved faster than stocks.
September no-change fell to 50%. A 25 basis point hike rose to 50%. October no-change sits at 71%. December now prices a 25 basis point hike at 49%, ahead of no-change at 43%.
The Coin Flip Meeting
Before Jackson Hole, September was a hold with risk. After Jackson Hole, it is a coin flip.
The morning's trade file showed why the Fed heard strength.
The goods deficit widened to $118.8 billion in July from $101.4 billion in June. Goods imports reached $318.2 billion. Goods exports fell to $199.4 billion.
The deficit widened because the buildout arrived from abroad.
Capital goods imports rose 11.3% to $140.1 billion. No other import category rose more than 0.1%. Several fell. Capital goods now make up more than two fifths of the import bill.
Domestic equipment orders did not match that pace.
Durable goods orders rose to $339.3 billion, but transport carried most of the move. Core capital goods orders rose only 0.2%, below the nearly 1% forecast.
The Order Somebody Else Filled
America is spending like the buildout is domestic. The border says much of it is not.
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Output, jobs and prices did not show a break.
Second-quarter GDP stayed at 1.5%. Real final sales to private domestic purchasers rose to 4.2%. That is the demand line. It ran far ahead of output.
Jobless claims fell to 203,000 for the week to August 22. Continuing claims fell to 1,778,000. The labor market is slower, but it is not breaking in the claims data.
That matters for policy.
The Fed can look through one soft job print if claims hold and private demand stays firm.
Oil stayed in the background but did not disappear. WTI closed at $83.45. Hormuz is still not priced as normal. Polymarket puts normal Strait traffic by September 30 at 5%. December 31 is 33%.
The ceasefire book looks calmer. US-Iran ceasefire through September 15 sits at 87%. September 30 is 78%. October 31 is 68%.
The Route That Still Does Not Clear
A ceasefire can hold while shipping stays damaged. Oil can pause while the Strait stays priced as broken.
Prediction markets had their best argument and their worst ruling in the same week.
The worst ruling came from sports.
The Ninth Circuit rejected efforts from Kalshi, Crypto.com and Robinhood to block Nevada from halting sports event contracts. Nevada says those products are gambling and should follow state gaming rules.
That cuts at the industry's main defense.
The Third Circuit had ruled the other way in April. That split points toward the Supreme Court. DraftKings rose 7%. Flutter gained more than 6%.
Sportsbooks heard relief.
Prediction markets heard a harder legal map.
The better argument came from small-business hedging. Kalshi, Susquehanna and Castle are building contracts for risks Wall Street usually ignores. A goat-herding firm can hedge labor-law risk. A bar can hedge a playoff refund offer. A tea company can hedge shipping costs.
The Line Regulators Will Draw
Sports looks like gambling. Business hedging looks like risk transfer. The industry now has to prove which one it wants to be.
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Friday tied the week into one question.
Is this economy strong enough to hike into, or fragile enough to hold?
Warsh leaned toward the first answer. The import data leaned there too. Private demand at 4.2% leaned there. Claims at 203,000 leaned there. AI capex leaned there.
The market did not fully agree.
Stocks fell only modestly. Oil was flat. The VIX fell. Investors did not price panic. They priced a higher front end.
What is priced: a September coin flip, a December hike leading no-change, capital goods imports carrying the buildout, and no normal Hormuz traffic by September.
What is not priced: Warsh staying quiet but hawkish, the trade deficit widening again, sports contracts moving to the Supreme Court, or business hedging becoming the safer path for event markets.