The Fed left rates unchanged on Wednesday, but three regional presidents voted to remove references to an “easing bias” in the central bank statement. Outgoing Chair Jerome Powell also surprised many by saying he’d stay on as a board member - at least for a time - after his chairmanship ends next month.
Powell’s term on the board will last until early 2028, meaning there will be no immediate vacancy on the board for President Trump to fill.
Futures markets have wiped out all bets on Fed easing this year, with a one-in-three chance of a rate hike by next April. Treasury yields are climbing again, with the 30-year yield briefly topping 5% again for the first time since September. The dollar jumped briefly, but was knocked back below 160 yen by Japanese intervention worries.
The European Central Bank and Bank of England will issue their rate decisions today. Like the Fed and Bank of Japan, they’re both expected to keep policy on hold but warn of oil-related inflationary pressure.
Meantime, the mega-cap earnings season swept in after Wednesday’s bell. Alphabet surged more than 6% on its beat and impressive cloud business, while Meta went the other way, dropping more than 6% as investors fretted about its latest capex boost.
The share price reactions to Amazon and Microsoft’s results were more subdued, but overall, there was no major red or green flag on the gigantic AI buildout. Spending from the so-called hyperscalers this year is now expected to top $700 billion overall.
Whether that high and rising bill is justified or not remains to be seen, but it means the underlying demand for AI chips and equipment will go up another gear for now while the end game for the massive capex continues to be assessed.
Finally, Asian shares fell on oil's renewed surge on Thursday, while European shares opened lower and Wall Street futures were mixed before the bell.
With that, onto today's column.
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