Yesterday was Fed Day and with it came some volatility however, as it turns out some of it was unrelated (there is some foreshadowing here). There was a little drama heading into the rate decision but at the end of the day the Federal Reserve left rates unchanged. After the unanimous decision in his first meeting the family fight Warsh looked for led to three dissenters who preferred a hike. Warsh implied that the market tightening of financial conditions inter-meeting, which he credited to the lack of forward guidance, was doing some of the Fed’s job for them. The initial market read was dovish with yields, particularly the 2yr, moving lower (partially positioning-related) and equities rallying. However, 10 and 30y yields started to move higher during Q&A, when reporters began to zero-in on the inflation framework and “what are you waiting for” to hike rates. He didn’t provide any clarity and at times the statements seemed to be contradictory, leaving markets to price in additional uncertainty. 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. President Trump was also speaking in the final hour of trade re-iterating that the US was going to hit Iran hard. Oil prices ended the day up >5% with ICE Brent trading back above $90.

It’s been a wildly busy and exciting morning here at the NYSE. There has been plenty for investors to digest but the MAC Desk has been waiting all day to digest a #7 from Jersey Mike’s as we celebrate their IPO today and it was a star-studded affair. For the record Jersey Mike’s is far and away the leader for the best sub around on Reinking’s Rankings (aka the Zagat’s of Subs!).

Back to markets, we are officially in the peak of earnings season, there was some key economic data, investors were still debating yesterday’s rate decision and then there were reports of a forced liquidation of what turned out to be a supernova hedge fund heavily exposed, and apparently levered, to the AI trade. Situational Awareness, was launched in 2024 with $225ml by former 24 year old OpenAI researcher. It had reportedly grown to >$40B and was up >400% at the end of June according to sources. Reportedly the firm had run up to 4X leverage and as the AI trade began to unwind and its positions were falling sharply it was facing margin calls. This morning the WSJ reported that Citadel had bought its levered positions, though the firm reportedly continues to hold cash backed positions and its ownership in Anthropic.