Fed holds rates, yield curve steepens as Big Tech earnings diverge

The Federal Reserve kept its policy rate unchanged, and Chair Warsh delivered a straightforward message: inflation is still too high, but the committee sees signs that policy is taking effect and wants additional data before determining its next move.

The decision gave traders room to back off the prospect of an imminent rate hike without fully embracing rate cuts. The dollar weakened during the announcement and press conference, though its full-day performance was mixed. Treasury yields offered the more notable development: the 2-year yield slipped while longer-dated yields climbed, causing the curve to steepen. U.S. stocks posted modest gains, oil stayed above $100 but retreated from its high of $103.55, and gold rose despite higher longer-term yields. InvestingLive's before-and-after Fed comparison highlighted that divergence. investinglive.com

After the market closed, attention turned to corporate earnings. Microsoft topped forecasts, propelled by robust Azure growth. Alphabet delivered better-than-expected cloud revenue, but earnings, total revenue, and several advertising metrics came in below estimates. Microsoft shares moved up 4.31%, while Alphabet shares slid nearly 10%.

Foreign exchange: Dollar mixed as central-bank differences stand out

The dollar finished mixed. It showed its strongest performance against the New Zealand dollar and its weakest against the Australian dollar.

• EURUSD: 1.1155, +0.30%.
• USDJPY: 157.94, unchanged.
• GBPUSD: 1.3325, +0.17%.
• USDCHF: 0.8282, −0.10%.
• USDCAD: 1.3992, −0.40%.
• AUDUSD: 0.7055, +0.44%.
• NZDUSD: 0.5626, −0.95%.

The EURUSD moved away from the double bottom at 1.1113 and has reached the falling 100-hour MA at 1.11746. That MA, along with the 200-hour MA, is the upside target to tilt the short-term bias higher. Without that, sellers remain in control.

The contrast between Australia and New Zealand was striking. Higher-than-expected Australian core inflation strengthened the case for further RBA tightening. The AUDUSD is trading around the key 200-day MA as it heads into the close at 0.7055.

In New Zealand, the RBNZ unexpectedly held its policy rate at 2.75% in a narrow 4–3 vote, disappointing traders who had expected a hike and weighing on the kiwi. investinglive.com. The NZDUSD has come off its low and is trading near a swing area target between 0.5625 and 0.5633.

The Canadian dollar strengthened after the Bank of Canada raised its rate by 25 basis points to 2.50%. The bank noted that inflation was becoming more entrenched but said uncertainty meant it would proceed carefully with any further tightening. investinglive.com

U.S. Treasuries: Short yields ease, long yields rise

The closing readings for the U.S. debt market show:

• 2-year: 4.7245%, down 1.25 basis points.
• 5-year: 4.8657%, up 2.37 basis points.
• 10-year: 5.0404%, up 4.74 basis points.
• 30-year: 5.3577%, up 5.27 basis points.

The curve steepened as the front end got some relief from Warsh's willingness to wait, while longer maturities stayed under pressure.

That distinction matters. Less urgency for a near-term hike does not automatically mean lower borrowing costs across the economy. With the 10-year yield above 5% and oil above $100, longer-term rates continued to pose a challenge for housing, business financing, and equity valuations.

U.S. stocks: Modest gains, with Nasdaq 100 leading

The closing levels for the major stock indices show gains across the benchmarks, led by the Nasdaq 100 and the small-cap Russell 2000.

• Dow industrial average: 52,485.24, +101.99 points or +0.19%.
• S&P 500: 7,744.38, +21.78 points or +0.28%.
• Nasdaq Composite: 26,549.85, +72.04 points or +0.27%.
• Russell 2000: 2,830.51, +11.64 points or +0.41%.
• Nasdaq 100: 29,813.16, +161.72 points or +0.55%.

The Nasdaq 100 led, followed by the Russell 2000. Stocks absorbed both the Fed's ongoing inflation concerns and the rise in longer-term yields without a broad retreat.

Major corporate news: Microsoft beats; Alphabet's cloud strength offsets only part of the weakness

After the close, Microsoft and Alphabet reported their latest earnings.

Microsoft's fiscal Q1 report beat expectations:

• EPS: $4.92 versus $4.72 expected.
• Revenue: $92.3 billion versus $90.6 billion expected.
• Operating income: $45.9 billion versus $44.1 billion expected.
• Net income: $36.6 billion versus $35.1 billion expected.
• Azure revenue growth, excluding currency effects: 48.0% versus 44.8% expected.

Microsoft also reported cloud revenue of $63.9 billion. Azure's growth provided an encouraging signal for cloud demand and the monetization of AI-related services.

Alphabet's Q3 results were more uneven:

• EPS: $2.12 versus $3.03 expected.
• Revenue: $127.6 billion versus $127.91 billion expected.
• Operating income: $40.58 billion versus $43.16 billion expected.
• Google Cloud revenue: $30.71 billion versus $29.1 billion expected.
• Search and other revenue: $63.35 billion versus $64.85 billion expected.
• YouTube advertising revenue: $11.21 billion versus $11.43 billion expected.
• Capital expenditures: $51.36 billion versus $55.78 billion expected.

Cloud was Alphabet's clear bright spot, but the broader revenue and operating-income misses left a more cautious message. The reports gave investors contrasting results to assess heading into the next session. Confirmed after-hours stock reactions were not supplied.

European stocks: Germany gains; Spain and Italy lag

European markets finished mixed:

• Germany's DAX: 25,704.03, +113.25 points or +0.44%.
• France's CAC 40: 7,886.97, −0.18 points, essentially unchanged.
• U.K.'s FTSE 100: 10,694.49, +7.94 points or +0.07%.
• Spain's IBEX 35: 18,883.51, −277.08 points or −1.45%.
• Italy's FTSE MIB: 49,824.31, −196.37 points or −0.40%.

Germany led the benchmarks, while Spain was the clear underperformer. The uneven finish showed that Europe had little shared direction ahead of the Fed announcement and U.S. technology earnings.

Fed: Inflation target unchanged, December decision open

Warsh reaffirmed the 2% PCE inflation objective, making clear that there is no softer target. Near-term inflation expectations have risen, but longer-term expectations remain consistent with confidence in the Fed's ability to restore price stability.

His economic assessment was constructive. Growth has strengthened, employment conditions remain healthy, and business investment is broadening. He also emphasized that improving productivity could allow stronger growth without an equivalent increase in inflation pressure.

The press conference left the Fed in a hold-and-assess position. Warsh declined to prejudge December and described the coming period as information rich. Another hike remains possible, but there was no commitment to deliver one and little indication of urgency to cut. investinglive.com

Crude oil and the Middle East: Diplomatic hopes meet unresolved risks

U.S. crude traded at $101.49, up $1.28 or 1.28%, in the supplied end-of-day snapshot.

Late headlines offered some encouragement on diplomacy. The Wall Street Journal reported that Vice President Vance had contacted an Iranian hard-liner in an effort to restart peace talks.

NewsNation separately reported substantial exchanges between Iran and the U.S. through mediators over a seven-day proposal intended to prevent a return to military operations after the U.S. midterm elections. Its source described discussions as positive but stressed that nothing had been finalized.

The reporting also remained contradictory. NewsNation's source disputed earlier reports that the U.S. had informed Gulf allies about a short, intense military campaign after the elections. Traders were therefore left weighing diplomatic progress against the continuing risk of renewed strikes.

On inventories, the weekly EIA report showed crude stocks falling by 1.892 million barrels versus a small build expected. Distillates also declined, but a surprise 3.870-million-barrel gasoline build tempered the otherwise supportive inventory figures. investinglive.com

Oil's continued elevation keeps the inflation implications of the conflict firmly in focus.

Gold and silver: Gold advances despite higher long yields

Gold traded near $4,077.99, up $17.66 or 0.43%. Silver stood at $54.4436, up $0.0380 or 0.07%.

Gold's advance came despite the rise in longer-term Treasury yields, which would normally create a headwind. The dollar's post-Fed retreat and the decline in the 2-year yield offered a supportive counterweight. The mixed full-day dollar performance, however, makes it difficult to attribute the gain to one factor.

Silver posted only a marginal advance, showing less enthusiasm than gold.

Bitcoin: Higher alongside equities

Bitcoin traded at $81,608, up $797 or 0.99%.

Its advance was consistent with the positive tone in equities. No separate crypto-specific catalyst was established in the available material.

The overall takeaway

The Fed is willing to wait, but inflation remains the constraint. The next session starts with longer-term Treasury yields still elevated, contrasting Microsoft and Alphabet earnings to digest, and Middle East negotiations that have yet to deliver an agreement. Oil remains a key link between the geopolitical headlines and the interest-rate outlook.