The Federal Reserve left interest rates unchanged on Wednesday afternoon after the conclusion of its July meeting. Unlike recent meetings when markets had a strong sense of how the Fed would act, there was genuine uncertainty surrounding the decision the Kevin Warsh-led committee would make. Moments before the announcement at 2 p.m. ET, there was a 29% probability of a rate hike, according to the CME FedWatch tool. That uncertainty was reflected in the vote, with three of the 12 Federal Open Market Committee members favoring a 25-basis point rate hike. The market's initial reaction was one of relief, with the S&P 500 and Nasdaq recovering a large portion of their earlier losses and ultimately turning positive during Warsh's press conference.
Warsh told reporters the Fed "will not hesitate" to act on inflation, which has been higher than the Fed's 2% target for years. "We will deliver on price stability," Warsh stressed, but it will take longer than the nearly nine weeks he's been chairman.
It's a busy earnings night ahead, with Meta Platforms and Microsoft reporting. Capital spending on AI infrastructure is the No. 1 question on investors' minds. What the two companies say about how much they plan to invest this year and into calendar 2027 could significantly impact semiconductor and AI infrastructure stocks and, by extension, the broader market.
