Markets Rise on Tech and AI Strength as Fed Keeps Pressure on Rates

U.S. equities closed the last week of August with modest gains, mainly supported by strong results from the technology and artificial intelligence sectors. The S&P 500 advanced around 0.5% and the Nasdaq rose approximately 0.8%, while small caps underperformed amid pressure from higher interest rates, with the Russell 2000 down 1.5%. Nvidia and other companies linked to AI infrastructure reinforced market optimism regarding the continuation of the technology investment cycle.

In fixed income, Treasuries fluctuated throughout the week, but the Fed’s more hawkish tone renewed pressure on yields following Kevin Warsh’s speech at Jackson Hole. Markets began pricing in more than a 55% probability of a rate hike in September after the Fed reinforced its commitment to fighting inflation. Credit spreads remained relatively contained, although investors are becoming increasingly cautious about the growing U.S. fiscal deficit and persistently elevated interest rates.

On the macro and geopolitical front, markets monitored new U.S. economic measures against Iran, as well as expanded tariffs involving China and Canada. Bitcoin remained stable near USD 80,000, while gold and silver fluctuated as the U.S. dollar strengthened following the Fed’s remarks. Over the weekend, new incidents near the Strait of Hormuz once again raised concerns about global energy supply and pushed oil prices higher at the start of this week.