The S&P 500 has fallen to the lows of the day, down 21 points to 7,709, reversing its initial reaction to the Federal Reserve.

A rumor has circulated that Warsh repeatedly referenced "hikes" in his text to interfere with algorithmic trading, though he was reportedly referring only to physical hikes in the area. That may explain some of the unusual market reaction, but the more likely explanation is that market participants initially piled into Nasdaq stocks despite the hawkish rhetoric. That thinking stems from the last cycle, when rate hikes did not hurt technology stocks because of the sector's low debt levels — a dynamic the author argues no longer holds given a $3 trillion AI buildout, even if the market behaved that way for a time. The scale of that capital spending, much of it funded in debt markets, marks a shift from the balance-sheet-light profile that previously insulated technology shares from tighter monetary policy.

Technology stocks are now lagging alongside utilities, a move consistent with rising yields. Utilities, typically valued for steady dividends, tend to lose relative appeal as Treasury yields climb, and higher discount rates press on the long-duration cash flows that support richly valued growth stocks.

Month-end flows may also be mixed into the move, but the equity decline now mirrors the hawkish reaction elsewhere in markets:

• Gold lower
• USD higher
• Treasury yields higher

Those moves were all extending at the time of writing. The combination — firmer dollar, higher yields, and weaker bullion — is a classic pattern following signals that interest rates may stay higher for longer, as higher-yielding US assets draw capital and non-yielding gold loses traction.

Attention next turns to economic data, which will shape expectations for the Fed's next moves: ISM manufacturing and JOLTS on Tuesday, ADP employment on Wednesday, ISM services on Thursday, and non-farm payrolls on Friday.