4 dissenters and 4 titans

 

Last night, the Fed left interest rates unchanged, as expected. But the decision was notable for four dissenting votes, the first such split since 1992. At the same time, two opposing forces are now at work: tech earnings are broadly supportive, while Brent crude is climbing to levels that are painful for the global economy.

The news flow over the past few hours could easily fill an entire week of coverage. Let us start with the Fed, which last night kept rates on hold. That was no surprise: the real issues lay elsewhere. The first was Jerome Powell's future. It was already clear that this would be his final meeting as Fed chair. But one question remained: would he serve out the rest of his term as governor? The answer is still unclear. Last night, he said he would remain on the Board of Governors "for a period to be determined". Powell does not seem entirely reassured by the Justice Department's decision, announced on Friday, to drop its investigation into him. Above all, his comments suggested that he would have been happy to retire, but that the Trump administration's attacks on the Fed, and what he sees as a threat to the institution's independence, have persuaded him to stay.

The second issue was the Fed's dovish bias. Until now, the statement had implied that the next move would be a rate cut. Most economists had expected the Fed to remove that reference, given that higher energy prices have pushed inflation back up. In the end, the wording stayed in. But the four dissenting votes, three of them on this point, and Powell's comments at the press conference nevertheless made it clear that the balance of opinion inside the Fed has shifted. The dovish bias is gone.

The market got the message. Yields continued to rise, and the US 10-year is now only a few basis points below its March high. Oil is also still moving higher. Yesterday, Brent touched $120, a new high for 2026, as the blockade of the Strait of Hormuz continues and no negotiated solution appears to be taking shape. The Wall Street Journal reported yesterday that Donald Trump was leaning towards a prolonged blockade to keep pressure on Iran.

The other major event of the previous session was the flood of US tech earnings after the Wall Street close. Within minutes, news terminals were covered with alerts: "Microsoft has…", "Alphabet announces…", "Meta results…" and "Amazon says…". Rather than drown you in figures, here is the stripped-down version: everyone is going to spend far more than expected to serve customers with little obvious ability to pay, such as OpenAI and Anthropic, but some are already generating a spectacular uplift in revenue because they have huge cloud capacity to sell into that demand. Alphabet is in that camp. Microsoft and Amazon are seeing a less spectacular version of the same trend. Meta is spending heavily but lacks cloud capacity, even if its advertising business seems to be benefiting from AI. The verdict: Alphabet up 7%, modest gains for Amazon and Microsoft, Meta down 7%. To state the obvious, one of the big questions for the coming quarters is whether the current investment cycle, which is profoundly reshaping the tech giants' business models, will turn into gold or into lead. For now, the market is rewarding hardware makers and platforms that have managed to make themselves indispensable to OpenAI, Anthropic and the rest.

Just as well the quartet's results provided some support, because the continuing surge in oil is enough to unsettle investors. US light crude, WTI, is flirting with $110 a barrel, while Brent is nearing $125. The rally, which has lifted oil by more than 85% in four months, has been fuelled by rumours from the White House and by Donald Trump's comments to Axios. The US president said he would not lift the naval blockade of Iranian ports until there is a nuclear agreement. The Pentagon is expected to brief him in the coming hours on a possible resumption of strikes on Iran.

Equity markets may appear to be looking the other way, but the bond market has tightened sharply, driven by both oil prices and dissent within the Fed. The 30-year US Treasury yield has moved back above 5% for the first time since early last summer. Shorter maturities have also risen markedly. Equities and bonds are telling two very different stories.

The earnings season does not let up today. There are plenty of banks and large industrial companies reporting in Europe this morning. In the United States, the calendar is again packed, with old-economy names reporting before the open and tech companies after the close, including Apple, AI's ugly duckling.

In Asia-Pacific, the initial enthusiasm over tech earnings was overwhelmed by the rise in oil. Every major market lost ground, with declines of more than 1% in Japan and India, 0.9% in South Korea and 1.3% Hong Kong, and 0.5% in Australia. European futures are pointing lower. There will be no column tomorrow, as several markets, including Euronext and Switzerland, are closed for a public holiday.

https://www.marketscreener.com/news/4-dissenters-and-4-titans-ce7f58dbd880ff26