US equities slip after Warsh turns hawkish, Hormuz flares

Warsh revives rate hike expectations

United States (US) equity markets closed lower on Friday after Federal Reserve (Fed) Chair Kevin Warsh used his maiden Jackson Hole speech to stress that inflation remains too high, prompting interest rate markets to price in earlier and more aggressive tightening.

After swinging from hawkish in June to dovish in July, Warsh returned to the hawkish camp at Jackson Hole. He said the Fed's 2% inflation target is non-negotiable, and that while recent personal consumption expenditures (PCE) and consumer price index (CPI) readings were better than expected, they do not confirm that underlying inflation trends have meaningfully improved. As the new week starts, the US rates market is pricing 15 basis points (bp) of hikes for September and 37 bp by the end of 2026, up from 10 bp and 25 bp a week ago.

Friday's weakness has carried into the new week, with S&P 500 futures trading down 0.43% at 7668 and  Nasdaq futures off 0.60% at 29,320 after tensions flared again in the Strait of Hormuz.

US Central Command said it struck launchers on Iran's Larak Island after Islamic Revolutionary Guard Corps (IRGC) forces were reported to be placing a fresh load of mines in the Strait. Iran has since fired ballistic missiles at a US base in Jordan, sending WTI crude oil 2.10% higher to $85.18.

Middle East tensions add to market uncertainty

This morning's flare-up is not a surprise. Iran's grip on the Strait has been loosening as barrels leak through from rival Gulf producers under US naval supervision. That left Iran with two choices: escalate or return to the negotiating table on worse terms than the June memorandum of understanding (MoU). How long the current skirmish lasts is hard to say. It could be days. It could be weeks.

Looking ahead, and outside the Middle East, the US second quarter (Q2) 2026 earnings season continues its run up a very long home straight, with earnings reports due this week from Snowflake, C3.ai, Dell Technologies, Broadcom, Hewlett Packard Enterprise and Lululemon Athletica. On the economic front, Friday's August non-farm payrolls report, previewed below, is the key event for the week.

Non-farm payrolls (August)

Date: Friday, 4 September at 10.30pm AEST

For July, the US labour market delivered a downside surprise as payrolls fell by 23,000, well short of the consensus forecast of around 80,000. June's gain was revised lower to just 20,000 (from an initial 57,000) and May was also revised down, leaving a combined 103,000 fewer jobs than previously reported.

Despite the weak headline, the unemployment rate edged lower to 4.1% from 4.2%, helped by a fall in the participation rate to 61.4%.

August's non-farm payrolls report will help determine whether the weakness seen in June and July was merely a temporary distortion driven by seasonal payback and local government noise, or the start of a broader slowdown in hiring. Consensus is looking for a modest rebound of around 55,000 jobs, with the unemployment rate expected to edge back up towards 4.2%.

US unemployment rate chart

Nasdaq 100 technical analysis

From its late-March low of 22,841, the Nasdaq 100 launched a powerful 35% rally in just over nine weeks to reach a record high of 30,762 in early June.

The correction that followed into late July played out mostly as expected and, in early August, we declared the correction complete at the 27,176 low and shifted to a bullish bias, only for trend-channel resistance near 32,000 to cut the rally short in mid-August.

While the pullback from that trend-channel resistance was a setback - the view remains that as long as the Nasdaq 100 holds above short-term support at 28,800ish, expect a retest and break of the 30,762 record high.

Aware that a sustained break below 28,800ish would negate the short-term bullish view and open the way for a retest of trend-channel support now near 27,600.

Nasdaq 100 daily candlestick chart

Dow Jones technical analysis

From its late-March low of 45,063, the Dow Jones staged an orderly rally of 9686 points (+21.40%) into the August high of 54,749.

Pullbacks of about 3.5% in June and July held logical support at 50,000 and 51,500 before the index regrouped and pushed on to fresh record highs. In early August, it started another correction, again of about 3.5%, down to 52,760, from where a bounce began. The jury is still out on whether that correction is complete and the uptrend has resumed, or whether there is more downside to come.

For now, as long as the Dow holds above trendline support around 53,250 - drawn from the late-March low of 45,063 - and stays above the recent 52,760 low, the uptrend remains intact, with scope for another leg towards 56,000.

A sustained break below 53,250, and then through the 52,750 support zone, would argue that a deeper decline is underway, first towards 51,500 and potentially 50,000.

Dow Jones daily candlestick chart

• _{Source: TradingView. The figures stated are as of 31 August 2026 Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}