Morning Bid: Fed sails into unchartered waters as Powell bows out

• Fed funds futures price 100% probability of a rate hold, with no expected policy changes until well into 2027
• Powell's legacy centers on his independence amid relentless pressure from President Trump, who originally appointed him; it remains unclear if Powell will stay on as a Fed governor after his chair term ends May 15
• Asian chipmakers declined after reports that OpenAI missed internal revenue and user targets, raising concerns about sustainability of massive data center spending

Market Summary: Fed Leadership Transition as Powell's Term Ends

Key Developments:

The Federal Reserve is set to hold its policy meeting on what is expected to be Jerome Powell's final day as chair, with the Senate anticipated to vote on Kevin Warsh's confirmation as his successor. Powell's term officially ends May 15, though it remains unclear whether he will continue as a Fed governor.

Monetary Policy Outlook:

Fed funds futures price a 100% probability of rates remaining unchanged, with no policy changes expected until well into 2027. The incoming Warsh faces immediate challenges navigating the central bank's independence as President Trump continues demanding aggressive rate cuts.

Market Reaction:

Global markets traded cautiously Wednesday, with S&P 500 e-mini futures up 0.1% and Asia-Pacific indices flat after erasing earlier losses. European futures remained largely unchanged, while FTSE futures declined 0.2%.

Corporate News:

• M&A: Pernod Ricard and Brown-Forman terminated merger discussions after failing to reach acceptable terms
• Tech Sector: Asian chipmakers declined following reports that OpenAI missed internal targets for weekly users and revenue, raising concerns about sustainability of AI infrastructure spending

Geopolitical Risks:

Markets remain cautious amid tensions between Washington and Tehran, with reports indicating Trump has directed aides to prepare for an extended Iran blockade.

Key Events:

Major tech earnings expected from Alphabet, Microsoft, Amazon, and Meta. European earnings include Deutsche Bank, Mercedes-Benz, AstraZeneca, and TotalEnergies. Economic data releases include Eurozone sentiment indicators and German CPI.

Powell's Legacy:

Debate centers on his maintenance of Fed independence despite relentless political pressure from Trump, who originally appointed him.