Fed Rate Decision Sparks Bond Selloff as Tech Earnings Surprise

This week was marked by significant market movements, driven in part by Fed Chair Kevin Warsh's comments following the Federal Reserve's decision to keep benchmark interest rates unchanged at 3.50%, 3.75%. The decision was not unanimous, with three policymakers dissenting in favor of a quarter-point hike for the first time since September 2016.

Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie Logan each preferred a rate hike. Warsh described the split as 'a good family fight,' but declined to specify what would trigger a rate hike or when it might occur, leaving investors with more questions than answers.

The bond market responded by pushing Treasury yields to 19-year highs. The 30-year yield rose 12 basis points to 5.21%, its highest since 2007, while the two-year yield fell four basis points. Long rates up, short rates down: traders pushed the rate hike further out and priced in an inflation problem.

Beyond interest rates, several major tech companies reported earnings that had significant impacts on their stock prices. Microsoft rose 15.5% on Thursday, its best session since 2008, after Azure revenue surpassed $100 billion for the first time in fiscal 2026 and management left calendar-year capital spending guidance unchanged at roughly $175 billion.

Azure's performance was not alone; Amazon Web Services grew 36.7% year over year, the fastest pace in 18 quarters, but Amazon itself fell short of expectations due to high spending on capital expenditures, which absorbed nearly all operating cash flow. Meta Platforms Inc. also reported revenue growth, but its free cash flow declined by 91%, and shares fell 8%.