WS #13002

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. The 9-3 vote with three dissents favoring a hike is the first time since 2016 that three dissents occurred in the same direction over a policy change, signaling growing conviction among some policymakers that higher rates are needed to curb resurgent inflation. Fed swaps no longer fully price in a September rate hike, now showing ~59.9% probability, down from higher levels earlier. 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. South Korea's stock market plunged (KOSPI down ~6% on the day, ~40% from peak) as the AI-driven boom fades, with chipmakers leading losses. This adds to the global tech selloff narrative. 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. The US high-grade corporate bond market saw the highest level of dysfunction in nearly three years, according to a New York Fed index. Retail investors are dumping single stocks at the fastest pace since the pandemic.