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Wall St Week Ahead-Newly led Fed poses wildcard for rockier US indexes
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Wall St Week Ahead-Newly led Fed poses wildcard for rockier US indexes
Jun 14, 2026 6:09 AM

* Fed chair Warsh set to lead first meeting

* Central bank expected to hold rates steady on Wednesday

* Indexes down from record highs as tech stocks falter

By Lewis Krauskopf

NEW YORK, June 12 (Reuters) - A suddenly rocky U.S. stock

market confronts a potential wildcard next week: A newly led

Federal Reserve at a time investors are worried that interest

rate hikes to fight inflation could dampen enthusiasm for

equities.

Investors are eager to see how Fed Chair Kevin Warsh handles his

first meeting as head of the U.S. central bank, one of Wall

Street's most closely watched events that frequently leads to

sharp moves in asset prices.

"As we've seen at times in the past, it can be a bit of a

challenge for a newer Fed chief to get the message right, to

stick the landing," said Jim Baird, chief investment officer

with Plante Moran Financial Advisors. "The market is watching

and parsing every word that's said."

After torrid runs, major stock indexes have cooled off so far

this month. The benchmark S&P 500 was last down more than

2% from its record closing high from June 2. The Nasdaq

Composite had slipped about 4.5% from its high that day.

Wall Street's "fear gauge," the Cboe Volatility Index

this week hit two-month highs, while the major averages were

seeing significant daily swings, including gains on Thursday and

Friday.

Technology shares have led the declines, just as they drove

indexes higher in scorching rallies off the market's low for the

year in late March. Investors are wary of an overheated rally

amid soaring optimism about AI-driven profits, despite risks

that include developments in the Middle East war and its impact

on energy prices and inflation.

Investors also will follow trading in Elon Musk's SpaceX after

the rockets and AI company made its highly anticipated stock

market debut on Friday. SpaceX shares rose 19% on the day,

lifting its market valuation over $2 trillion.

The S&P 500 remains up more than 8% this year, while the Nasdaq

is up over 11%.

FED LIKELY ON HOLD, FOR NOW

Any potential interest-rate hike by the Fed could present

headwinds for equities by raising borrowing costs for consumers

and businesses. Higher rates also make bonds more competitive

investments.

While the Fed is widely expected to hold rates steady when

it gives its monetary policy statement on Wednesday, investors

will look for signs of policymakers' views going forward.

Warsh was picked by President Donald Trump, who railed at the

central bank and prior Fed Chair Jerome Powell for not cutting

rates more to his liking.

But Fed fund futures suggest market expectations that the

central bank will increase rates by the end of the year,

according to LSEG data.

Economic data this week showed U.S. consumer inflation in May

increased at its fastest pace in three years. The inflation

reports, along with recent solid employment data, have led

investors to think the Fed will focus on containing inflation,

which could mean leaning more toward rate hikes.

"Trying to understand the reaction function of this new

administration at the Fed is going to be key," said Marvin Loh,

senior global macro strategist at State Street. "If we get that

type of a hawkish hold, if you will, I think that that would

kind of surprise the market."

FED PROJECTIONS, WARSH COMMUNICATION IN FOCUS

As part of the meeting, Fed officials are expected to give

projections about the path of interest rates and about the

economy, including inflation. Investors will also scrutinize

Warsh's press conference after the policy decision on Wednesday.

"The biggest thing is will the Fed hold, and what's the

language around it?" said Marta Norton, chief investment

strategist at retirement and wealth services provider Empower.

"How does it describe inflation?"

Investors will also want to learn Warsh's policy goals and

how he might seek to reshape the Fed.

For example, Warsh has expressed a desire to pare the Fed's

$6.7 trillion balance sheet, which could cause ripples in

markets.

Warsh might also seek to change the way the Fed communicates

or gives guidance about policy, investors said.

"If we are more data dependent and we're not getting

visibility from the Fed of what they want to do, then I would

think every economic release gets a little bit more attention

and can create a little bit more volatility than we've seen over

the last few years," said Jeff Given, head of developed-market

fixed income at Manulife Investment Management.

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