Fed Holds, Hike Odds Crash to 18%; AI Trade Shows Resilience Despite Questioning
Key Questions
What was the Fed's decision on interest rates in June and how did it affect hike expectations?
The Fed held rates steady in June while signaling one more hike ahead. Softer-than-expected jobs data caused market-implied hike odds to fall sharply to 18%. New Chair Warsh faces dovish pressure amid gradual disinflation signals from officials.
How resilient was the AI trade despite market questioning?
Chip stocks rallied strongly with SOXX up 3% and AMD gaining over 9%, even as AI spending faced scrutiny. Q2 earnings are projected to rise 23%, with AI infrastructure contributing 60% of S&P EPS growth. Sector rotation shows XLK and related leaders reclaiming dominance.
What record levels did major indices reach recently?
The Dow topped 53,000 amid broad market gains. Record net profit margins of 14.8% in Q1 and strong earnings breadth supported the rally. Treasury yields dipped after Core PCE data matched forecasts.
What funding news emerged for AI companies like Databricks?
Databricks raised a strategic round at a $188 billion valuation to advance AI tools including Unity AI Gateway and Genie. North American startup funding reached $392 billion in H1, with 80% AI-driven. SambaNova also secured $1 billion at an $11 billion valuation.
How did Wall Street investment banking activity perform in Q2?
IB fees jumped 45% in Q2, marking a record IPO quarter with M&A activity up 40%, largely AI-related. Alpaca raised $135 million to build agent-first brokerage infrastructure. Upcoming earnings from TSMC, Goldman, and JPM are key near-term catalysts.
Fed held rates in June with one more hike signaled, but softer jobs data (57K) crashed hike odds to 18%. Gold bounced to $4,195 then CPM issued sell signal targeting $3,975. AI spending trade questioned but chip stocks rallied (SOXX +3%, AMD +9%+), Dow topped 53,000, and Q2 earnings expected +23% with AI infrastructure 60% of S&P EPS growth. New Chair Warsh under dovish pressure. ISM services expanded. North American startup funding hit $392B H1, 80% AI-driven. SambaNova raised $1B at $11B with JPMorgan partnership and Intel co-development. DeepSeek aims to make its own AI inference chip. Sector rotation analysis shows clean unwind of defensive extremes with EEM, XLK, Financials reclaiming leadership; credit spreads narrowing. Treasury yields dipped after Core PCE matched forecasts; Williams reiterated gradual disinflation; Bessent's '3 through 3' fiscal plan. The stock market/economy decoupling highlighted by K-shaped consumption and wealth effect concentration. NDX VIX vs SPX VIX spread remains elevated. EU threatened Meta with fines over addictive features. Upcoming earnings season (TSMC, Goldman, JPM) and Fed Chair Warsh speech are key catalysts. A recent analysis notes record net profit margins (14.8% in Q1) and broad earnings strength supporting the rally. New: Wall Street IB fees jumped 45% in Q2, record IPO quarter, M&A up 40% driven by AI. Databricks raised at $188B valuation. Alpaca raised $135M for agent-first brokerage infrastructure.