Today’s Market Recap: Three Fed Voters Flip to Hawkish, Trump Vows Iran Strike, Brent Surges Back to $90

Tracking the Market Trend

TradingKey - Pressured by a triple whammy of negative factors—escalating geopolitical tensions, the Fed’s tightening policy, and a cooling AI narrative—the three major U.S. stock indices all plunged on Wednesday. Market panic intensified sharply, with the VIX fear index surging 13.29% to close at 20.63.

At the close, the Dow Jones Industrial Average fell 2.19% to 51,594.14; the Nasdaq Composite dropped 1.74% to 24,442.94; and the S&P 500 declined 1.52% to 7,316.15.

The semiconductor sector was hit hardest, with the Philadelphia Semiconductor Index plummeting more than 5%. Among leading stocks, AMD (AMD) and Intel (INTC) both fell more than 5%, while NVIDIA (NVDA) dropped 3.55%.

The software sector, however, remained relatively strong, outperforming the broader market for the fourth consecutive day. Related ETFs edged up 0.64% intraday, indicating that investors were making defensive shifts within the technology sector.

After-hours earnings reports triggered massive swings in individual stocks: Qualcomm (QCOM) fell more than 5%, Meta (META) plummeted 8%, while Microsoft (MSFT) bucked the trend with a sharp 8% gain.

The Federal Reserve’s hawkish stance continued to weigh on the market. Three voting members of the Federal Open Market Committee publicly advocated resuming interest rate hikes, driving long-term yields to surge. The yield on the 30-year U.S. Treasury note jumped 11 basis points in a single day, breaking through the 5.2% threshold and hitting its highest level since June 2007.

The U.S. Dollar Index surged before plunging sharply, closing down 0.62%; the euro rose against the dollar accordingly, gaining more than 0.6%. Gold benefited from the weaker dollar, with spot gold rebounding 0.87% and briefly surpassing $4,100 per ounce during the session.

Crude oil surged on geopolitical developments. As Trump reiterated his warning to “hit Iran hard” and sought to impose new tariffs, Brent crude soared as much as 8% during the session, returning to the $90 per barrel mark.

Market Headline

The situation in the Middle East has suddenly escalated, with Brent crude surging more than 8% during trading as geopolitical risk premiums once again dominated the market. Trump once again warned that he would “hit Iran hard” and is seeking to impose additional tariffs on Iran. In his latest remarks, he proposed for the first time using the framework of the Russia-related legislation to simultaneously advance a two-pronged approach of military strikes and economic sanctions. He revealed that following the Iranian missile attack on U.S. forces, the U.S. is determined to “teach them a lesson.” Although Iran has apologized through official channels and requested that a strike be avoided, the U.S. will still take action, and whether an agreement can be reached in the future remains “to be seen.” As a result of this shock, U.S. stocks came under pressure and fell, while oil price gains rapidly expanded.

Internal divisions within the Federal Reserve have significantly intensified, with three voting members supporting a rate hike—marking the first time since 2016 that three members have voted against the decision. The statement showed that one-quarter of the voting members believed rates should be raised by 25 basis points, highlighting the growing internal pressure the Fed faces in tackling stubborn inflation. The statement reiterated that the conflict in the Middle East is causing high economic uncertainty, that inflation remains elevated—partly due to rising energy costs—and that the economy is expanding steadily while the unemployment rate remains largely stable.

Microsoft surged 8% in after-hours trading, driven by better-than-expected results fueled by positive developments in both its cloud business and capital expenditure outlook. Fourth-quarter total revenue rose 18% year-over-year, and EPS increased 23%, exceeding expectations by more than 10%; Azure cloud revenue grew 43%, with full-year cloud revenue surpassing $100 billion for the first time. The investment in Anthropic contributed $3.2 billion in revenue for the quarter, while total capital expenditures rose 70% year-over-year but came in 3.5% below expectations. The company lowered its full-year capital expenditure guidance to $175 billion, nearly 8% below the previous estimate; driven by multiple positive factors, the stock price rose as much as 9% in after-hours trading.

Meta plummeted 8% in after-hours trading; while revenue exceeded expectations, it could not mask concerns over AI investments, and both Q3 guidance and cash flow disappointed the market. Second-quarter revenue was $60.8 billion, up 28% and slightly above expectations, but the median revenue guidance for the third quarter—$62.5 billion—fell short of the expected $63.2 billion. The company raised the lower bound of its full-year capital expenditure guidance to $130 billion, while free cash flow plummeted to $784 million, hitting a four-year low. The stock price fell as much as 10% in after-hours trading.

Qualcomm’s Q3 earnings came under pressure, with net income falling 25%; its stock price dropped about 4% in after-hours trading. Hit by a year-over-year surge of approximately 300% in memory chip prices, mobile chip revenue for the quarter plummeted 20% to $5.1 billion, while total revenue fell 4% year-over-year to $9.95 billion. The company also raised product prices and issued lower-than-expected guidance for the fourth fiscal quarter, sparking market concerns about continued weakness in mobile demand.

South Korea plans to step up stock market stabilization measures, considering limits on retail investors’ leveraged ETF holdings and higher trading costs. Regulators have determined that concentrated trading in single-stock leveraged products has significantly amplified market volatility and plan to set a cap on the proportion of such products in retail investors’ portfolios while raising related trading costs to curb excessive speculation.

xAI has filed a lawsuit against Minnesota’s “strip app” ban, challenging the constitutionality of local AI content regulation. Following its lawsuit in California, SpaceX’s(SPCX) xAI has launched another legal challenge, arguing that the bill’s restrictions are overly broad, target visual expression tools themselves, and may violate the First Amendment; furthermore, the per-incident penalty mechanism could expose companies to astronomical fines in the hundreds of billions, constituting an excessive blow to the AI industry. xAI emphasizes that it has established technical blocking mechanisms and proactively sues users who violate its policies, rather than allowing the generation of inappropriate content.

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