No surprises from the Fed today. Jerome Powell says they are "meaningfully restrictive" territory (i.e. still putting downward pressure on prices and the economy), but also says that they are in "no hurry" to remove that restriction.
The bigger news on Fed policy came from Trump. Shortly after the Fed press conference, he posted this …
Trump has made it clear that he wants lower rates. And remember in his first term, he voiced his displeasure with Jay Powell's Fed for taking rates up from 25 basis points to 225 basis points, despite inflation running mostly below target throughout.
The Fed ended up reversing course in late 2019, forced by markets back into an easing cycle.
Let's talk about earnings …
As we discussed yesterday, we heard earnings from three of the big data center builders after the market close today.
Remember, the advanced AI model out of China (DeepSeek) was thought, by some, to have exposed the big hyperscalers as having over-invested in infrastructure capacity.
Would they signal any pullback on spending?
The answer is no.
Microsoft continues to project around $80 billion in capex this year, still well behind in fulfilling on a $300 billion backlog of orders. And Meta sees $60-$65 billion in infrastructure spend to support scaling Meta AI to over a billion people this year.
As we discussed yesterday, one lesson from DeepSeek is that there will be more cheaply developed AI models, which will lead to more overall AI usage (requiring more global computing power).
The other lesson is that dealing with China will become, maybe, priority number one of Trump 2.0.
On that note, Howard Lutnick had his Senate hearing today, on his nomination to become the Secretary of Commerce.
He said this about DeepSeek …
"I do not believe that DeepSeek was done all above board, that's nonsense. They stole things, they broke-in, they've taken our IP. It's got to end."
Lutnick's job will be all about China.
