Three forces drove the market this week: Federal Reserve Chair Kevin Warsh's hawkish coming-out party, Nvidia's (NVDA) monster quarter, and a cybersecurity rally that turned the software trade on its head. Let's break it all down.

Warsh Puts the Inflation Fight Front and Center

In his first Jackson Hole keynote, Fed Chair Kevin Warsh delivered the most hawkish message the central bank has sent in months. He hit three key points.

On inflation, Warsh reaffirmed the 2% PCE target as "a firm, fixed target," clearing up any confusion from an internal task force about which inflation gauge the Fed prefers. He also pushed back on the idea that recent cooler inflation readings mean the battle is won, saying summer's better-than-expected prints "do not tell me that underlying trends have meaningfully improved." For context, core PCE, the Fed's favorite gauge, is running at 3.7% over the past year and 4.1% annualized over the last six months.

On financial conditions, Warsh said he'd "struggle to describe current conditions as restrictive," pointing to credit spreads near historic tights and easy bank lending standards. The message: there's room to hike from here.

On labor, he flagged the 4.1% unemployment rate as consistent with full employment, removing the usual dovish trigger for rate cuts.

Markets Reprice for a Hawkish Fed

The reaction in rates was textbook hawkish repricing. The short end of the curve sold off much more aggressively than the long end, as traders priced in hikes at the front. According to CME FedWatch, the probability of a September 16 rate hike jumped to 57.5%, up from 39.9% a week earlier and just 24% a month ago. The U.S. Dollar Index rallied to 99.5 on Friday, extending its rebound from the August 21 three-month low of 98.8.

Nvidia's Blowout Quarter and Its Best Day Since April 2025

Nvidia (NVDA) reported second-quarter fiscal 2027 revenue of $96.2 billion after Wednesday's close, up 106% year-over-year and beating the $92 billion consensus by 4.5%. Third-quarter guidance came in at $108 billion, roughly $4 billion above what analysts expected. Data-center revenue continued its parabolic climb.

Shares closed 8.74% higher on Thursday, the biggest single-session gain since April 2025, as the AI demand narrative overwhelmed any margin concerns. On Friday, though, the stock gave back nearly half of those gains amid broader tech weakness triggered by Warsh's remarks.

CrowdStrike's Historic Day

The most violent sector move of the week came from cybersecurity. CrowdStrike Holdings (CRWD) surged 20.5% on Thursday, the biggest single-day gain in the stock's history, after reporting a record second quarter. Net new annual recurring revenue jumped 51% year-over-year to a record $333 million, marking the sixth straight quarter of acceleration. Falcon Flex ARR crossed $2.29 billion, up 101% year-over-year.

Management pitched AI-driven demand as the "Mythos Moment," positioning AI agents as both an expanding attack surface and a driver of demand. The broader Global X Cybersecurity ETF (BUG) rallied nearly 6%.

Salesforce's Big Week

Salesforce (CRM) was the S&P 500's top-performing name for the week after delivering a blowout quarter. Adjusted EPS of $5.90 crushed the $3.27 consensus, an 80% beat. Revenue of $11.35 billion grew 11%. Management lifted fiscal-year 2027 adjusted EPS guidance to $16.67-$16.71, well above the $14.16 Street expected.

Salesforce also unveiled "Claudeforce," a deepened partnership with Anthropic that makes Claude the default AI model across Slack and core Salesforce products. The company booked a $2.6 billion mark-to-market gain on its Anthropic stake.

What to Watch Next Week

Attention now shifts to the U.S. labor market, with the BLS Employment Situation report for July anchoring the calendar next Friday. ISM PMIs are also on deck. Warsh's hawkish read on employment gives Friday's payrolls report added weight: a hot print would cement September hike odds above 60%, while a soft one would test his framework directly.