The S&P 500 has slipped nearly 3% from its June 2 peak, while the Nasdaq Composite has pulled back by roughly 5%. This cooling trend follows a month of significant daily swings and a rise in the Cboe Volatility Index to two-month highs. Technology shares, previously the engines of this year’s rally, are now at the forefront of the decline as concerns mount over AI-driven valuations and broader economic pressures.

While analysts widely expect the Fed to keep interest rates steady this Wednesday, the focus remains on the central bank’s forward-looking language. The recent surge in May consumer inflation—the fastest in three years—coupled with robust employment data, has fueled speculation about potential rate hikes later this year. Strategists warn that any hawkish signaling from the new administration could catch investors off guard.

Beyond immediate rate decisions, the market is eager to decipher Warsh’s long-term policy framework. His expressed interest in reducing the Fed’s $6.7 trillion balance sheet and potential shifts in communication strategy are top of mind for institutional managers. As the central bank releases its updated economic projections, the clarity—or lack thereof—in Warsh’s inaugural press conference may set the tone for market stability in the coming months.