FOMC Holds, Market Folds, Q2 Earnings Mostly Bold

• Three FOMC members (Hammack, Kashkari, and Logan) dissented and voted for a 25 bps rate increase, while Warsh maintained the Fed's strict 2% inflation target with no soft implicit target
• The 10-year Treasury yield jumped from 4.63% to 4.69% following Warsh's press conference, as bond markets reacted negatively to minimal policy guidance and concerns about supply shocks driving inflation
• Meta reported positive free cash flow of $784 million with Daily Active People reaching 3.6 billion, while Microsoft benefited from a $3.2 billion gain from Anthropic; other tech earnings showed mixed results

Market Summary: FOMC Holds Rates, Mixed Q2 Earnings Results

Federal Reserve Policy Decision

The Federal Open Market Committee (FOMC) voted to maintain the federal funds rate at 3.50-3.75% for the fifth consecutive meeting on July 29, 2026. The decision drew three dissents from Cleveland Fed President Beth Hammack, Minneapolis' Neel Kashkari, and Dallas' Lorie Logan, who all advocated for a 25 basis point rate hike.

Fed Chair Kevin Warsh emphasized the central bank's firm "2 percent goal" for inflation, rejecting any notion of a "soft inflation target." Warsh attributed current elevated inflation to "supply shocks," particularly oil price increases linked to geopolitical tensions in Iran affecting the Strait of Hormuz.

Market Reaction

Bond markets responded negatively to the Fed's non-committal stance. The 10-year Treasury yield climbed from 4.63% to 4.69%, while the 2-year yield edged down to 4.26%, widening the yield curve to over 40 basis points.

Corporate Earnings Highlights

• Meta Platforms (META): Maintained capital expenditure guidance of $130-145 billion with positive free cash flow of $784 million. Daily Active People rebounded to 3.6 billion, though revenue guidance disappointed.

• Microsoft (MSFT): Reported $4.74 per share earnings, boosted by a $3.2 billion gain from Anthropic investment.

• Qualcomm (QCOM) and Starbucks (SBUX): Posted mixed results with Starbucks beating earnings expectations by $0.85 per share.

• Chipotle Mexican Grill (CMG): Modestly outperformed expectations, beating bottom-line estimates by $0.01 to reach $0.33 per share.