WS #13001

The Federal Reserve held rates steady at 3.50%-3.75% in a 9-3 vote, with three dissents favoring a 25bp hike. The statement noted solid economic activity, strong productivity, and elevated inflation partly due to energy supply shocks. This was widely expected (Polymarket showed ~65% probability of no change), but the hawkish dissent and persistent inflation language reinforce the 'higher for longer' narrative. Attention now shifts to Chair Warsh's press conference for clues on future policy direction. Geopolitical tensions continue to escalate. Multiple sources report fresh US strikes on Iran, with Iran pushing back and five IRGC advisors killed in Iraq airstrikes attributed to US/Saudi forces. Oil prices have spiked sharply (WTI +6.88%, Brent +7.62%), and Russia's Black Sea oil terminal suspended loadings due to Ukrainian drone attacks, disrupting ~20% of seaborne crude exports. The US issued sweeping 60-day Iran oil sanctions waivers, unlocking billions in revenue for Tehran, which could partially offset supply fears but also signals fragile diplomacy. Tech sector faces headwinds. AI spending concerns dominate: Nvidia's potential $250B backstop for OpenAI, Alphabet's capex hike, and circular financing fears are driving a rotation out of AI infrastructure stocks. Apple surpassed Nvidia as the world's most valuable company ($5T), benefiting from its reluctance to spend heavily on AI capex. Meta reports earnings tonight, with the stock on a nine-day losing streak. Super Micro surged 15% on strong orders and margin improvement, providing a counter-narrative. Macro data showed core PCE at 3.4% (highest since Oct 2023), factory job cuts near financial crisis levels, and the US high-grade corporate bond market at highest dysfunction in nearly three years. Retail investors are dumping single stocks at the fastest pace since the pandemic, and Nvidia dip-buying remains weak.