VIX in Whipsaw on Sticky Inflation, Fed Dissent and Lofty AI Capex

• Meta fell 9% after raising 2026 capex to $125-$145 billion, while Alphabet rallied 6% on earnings that beat expectations with $5.11 EPS versus $2.63 expected and 63% Cloud growth
• Combined hyperscaler spending (Microsoft at $190B, Amazon at $200B, Meta at $125-$145B, Alphabet at $180-$190B) jumped $55 billion higher than pre-earnings estimates
• Market rotation accelerated away from AI-heavy mega-caps into cyclicals and small caps, with Dow proxy DIA up 1% and QQQ down 0.5% amid sticky inflation and WTI crude at $99.89

Market Summary: VIX Volatility Amid AI Spending Surge and Fed Dissent

Key Market Developments

The CBOE Volatility Index (VIX) experienced significant whipsaw action, trading between 17.32 and 18.73 (an 8.2% intraday range) as markets digested mixed signals from mega-cap tech earnings, macroeconomic data, and Federal Reserve policy uncertainty.

Major Corporate Developments

AI Capital Expenditure Shock: Combined 2026 capex guidance from four major hyperscalers jumped from $670 billion to $725 billion:

• Meta Platforms (META): Raised capex to $125-145 billion (+$10B both ends); stock fell 9%
• Microsoft (MSFT): Signaled $190 billion in 2026 spending; down 5%
• Amazon (AMZN): Maintained nearly $200 billion guidance; down 1%
• Alphabet (GOOGL): Posted EPS of $5.11 vs. $2.63 expected on 63% Cloud growth; rallied 6%

Earnings Highlights:

• Amazon AWS grew 28% (fastest in 15 quarters)
• Microsoft Azure expanded 40%
• Meta revenue increased 33%

Macroeconomic Context

• Fed Policy: Held rates at 3.5-3.75% with historic 8-4 dissent split (widest since 1992)
• GDP: Q1 came in at 2.0%
• Inflation: Core PCE at 128.86 (90th percentile of 12-month range)
• Oil: WTI crude at $99.89, up 9.7% weekly

Market Rotation

Investor sentiment shifted from mega-cap tech toward cyclicals and small caps. The Dow proxy (DIA) gained ~1%, small-cap IWM rose ~0.5%, while NASDAQ-tracking QQQ declined ~0.5%.

Next Catalysts: Apple earnings (after close) and Friday's nonfarm payrolls report.