The Fed held rates at 3.50% to 3.75% with three officials voting for a hike. Microsoft surged after strong Azure growth. Meta raised its 2026 capex floor to $135 billion after missing EPS. Apple and Amazon report after the close today.
The Fed held rates.
The market acted like it hiked.
The Dow fell 1,153 points Wednesday, its worst session since April 2025. The S&P 500 dropped 1.52% to 7,316. The Nasdaq lost 1.74% and finished more than 10% below its record high.
Treasury yields climbed.
The 10-year reached 4.657%. The 30-year moved above 5.19%.
Markets expected a hold.
They did not expect three officials to vote for a rate hike.
Beth Hammack, Neel Kashkari, and Lorie Logan all dissented in favor of raising rates by 25 basis points. It was the largest pro-hike dissent since 2016.
Chair Kevin Warsh left rates unchanged and offered little guidance about the next move.
Markets filled that silence by pushing yields higher.
Then earnings changed the mood.
Microsoft (MSFT) reported revenue of $90 billion, up 18%, while Azure growth accelerated to 43%. EPS reached $4.81, well above expectations.
Meta Platforms (META) reported revenue of $60.8 billion, but EPS of $6.18 missed estimates. The company also lifted the bottom of its 2026 capex range to $135 billion.
Futures recovered overnight.
S&P 500 futures rose 0.4%.
Nasdaq 100 futures gained 0.7%.
Dow futures added 0.3%.
Samsung Electronics also reported record results before the open.
Operating profit reached KRW 89.5 trillion, up 1,814% from a year ago, helping lift the KOSPI more than 2%.
Apple (AAPL) and Amazon (AMZN) report after today's close.
The Signal
The Fed pressured markets during the day. Microsoft rebuilt confidence after the bell.
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The Middle East remains the market's biggest wildcard.
The United States launched another wave of strikes against Iran overnight after this week's missile attacks on U.S. forces.
Brent climbed back toward $90.
WTI remained above $84.
Oil has now reversed sharply several times during the past month.
Diplomatic talks continue alongside military action.
Iran's foreign minister remained in contact with Oman and Saudi Arabia as both sides continued discussing maritime traffic through the Strait of Hormuz.
At the same time, Iran-backed militias struck Saudi oil facilities for a second straight day.
Supply also tightened.
API data showed U.S. crude inventories fell by 3.3 million barrels last week.
The market is balancing tighter inventories against growing geopolitical risk.
Energy Signal
Diplomacy remains alive, but military action continues setting the short-term direction for oil.
The Fed delivered the expected decision.
The vote changed the message.
The FOMC voted 9-3 to keep rates between 3.50% and 3.75%.
Three members wanted another hike.
Warsh repeated that inflation remains above target and described the economy as resilient.
He also pointed to AI investment, which is growing at nearly 20% over the past four quarters.
President Trump again called for lower rates, saying Warsh would prefer to cut but remains constrained by the committee.
Warsh did not respond.
The bond market made its own judgment.
The 30-year Treasury moved above 5%.
That matters because long-term borrowing costs shape how companies finance data centers, cloud infrastructure, and AI investment.
Attention now shifts to Jackson Hole at the end of August.
Markets expect that conference to provide the Fed's clearest policy signal before September.
Macro Signal
The Fed paused again, but the bond market became more restrictive.
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Microsoft changed the AI conversation.
Meta Platforms kept it alive.
Microsoft showed that heavy AI spending is producing measurable returns.
Azure grew 43%, beating guidance.
Annual Azure revenue passed $100 billion for the first time.
Microsoft 365 Copilot reached 30 million paid users.
Meta reported another strong revenue quarter but weaker profitability.
EPS missed expectations.
The company raised the lower end of its capital spending range by another $10 billion to $135 billion.
Investors continue asking the same question.
How long can spending rise faster than free cash flow?
Samsung Electronics answered a different part of the story.
Revenue reached KRW 171.5 trillion.
Operating profit climbed to KRW 89.5 trillion, the highest quarterly chip profit in company history.
Demand for high-bandwidth memory remained strong, although management warned AI chip supply could remain tight through 2027.
Tonight completes the week's earnings cycle.
Apple (AAPL) reports with Wall Street expecting about $108.96 billion in revenue and EPS of $1.89.
Amazon will be judged on AWS growth and capital spending guidance.
Capital Signal
Microsoft proved AI demand is real. Apple and Amazon now decide whether that story extends across the sector.
Bitcoin reacted differently than stocks.
The Fed decision initially lifted Bitcoin above $64,400.
Higher Treasury yields quickly erased most of the gain.
Bitcoin now trades near $64,000.
Real yields remain crypto's biggest macro headwind.
Institutional adoption continues moving forward.
Morgan Stanley (MS) launched two new staking exchange-traded products focused on Ethereum and Solana.
Both charge a 0.14% expense ratio and pass staking rewards directly to investors.
Meanwhile, Ethereum ETFs continue attracting stronger demand than Bitcoin funds.
Bitcoin ETFs recorded four straight days of outflows totaling about $526 million.
Ethereum ETFs added nearly 37,959 ETH over the same period, with BlackRock's ETHA accounting for almost all of those inflows.
Congress remains another obstacle.
The CLARITY Act has only a short window before the August recess, and lawmakers still lack enough votes to move the bill forward.
The Verdict
Bitcoin is holding near $64,000, but institutional money is becoming more selective as investors wait for policy clarity.
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Wednesday showed that two stories can be true at the same time.
The Fed became more hawkish.
Microsoft delivered one of its strongest AI quarters ever.
Higher interest rates raise the cost of financing AI infrastructure.
Stronger Azure growth proves that investment can still create meaningful revenue.
Meta sits between those two forces.
The company continues spending aggressively while investors wait for cash flow to catch up.
Tonight Apple and Amazon close the biggest earnings week of the summer.
By the end of today, investors should have a much clearer answer to the question that has driven markets for weeks.
Can AI revenue continue growing fast enough to justify the spending required to build it?
