Good morning. Yesterday was Fed Day and with it came some volatility. The Federal Reserve left rates unchanged but the focus was on Warsh's press conference and the lack of specific details on a range of questions. The 2yr yield moved lower however, 10 and 30y yields started to move higher during Q&A. The yield curve steepened significantly with the 30yr yield hitting a new YTD high and the highest level since 2007. In the final hour of equity trading the S&P 500 reversed ~130pts to close at session lows down ~1.5%. The momentum unwind continued with the AI capex beneficiaries getting hit the hardest.

It’s a very busy morning chock full of earnings and important economic data while investors continue to debate yesterday’s rate decision. Shortly after the close the mega-cap tech earnings began to roll in and they were a mixed bag. Microsoft is the star (+10% pre-market). For Meta (-10%) headline EPS was a miss but ex-items the results were a touch ahead of estimates while Q3 rev guidance disappointed. FCF was better than expected though. The company increased the bottom end of its Capex guidance and Zuckerberg pushed back on the idea of the company leasing out compute capacity, prioritizing focusing on the long-term strategy as opposed to short term monetization. After yesterday’s afternoon sell-off, S&P futures have bounced back ~0.8% and are trading pretty much where we were ahead of the Fed rate decision.

We’re following up yesterday’s Fed Day with a big morning for economic data. Headline June PCE fell 0.1% m.m, as expected, and down from last month’s 0.5%. Core rose 0.1% a tick below the 0.2% consensus and also down from last month’s 0.3% growth. This is another coolish inflation print following the last CPI and PPI prints and adds credence to the Fed’s decision to keep rates unchanged yesterday. Q2 GDP rose 1.5%, below estimates and last month’s 2.1%. Higher imports were the main drag, pulling GDP down over 1%, while Consumer Spending was strong, growing 3.2% (up from 0.5% last quarter) and contributing 2.0% to the overall growth (so, more than the total 1.5% growth). Longer-tenor yields are about unchanged, taking a breather after yesterday’s sprint higher. The US Dollar Index is following the short end lower.