Daily PA Wrap

The Fed hiked for the first time in three years — a unanimous quarter-point move to 3.75%-4% — and Chair Kevin Warsh leaned hawkish rather than declaring victory: “I would be hard pressed to describe broad financial conditions as restrictive,” he said, adding the committee “removed a dose of accommodation,” while the dot plot showed 16 of 18 officials expecting at least one more hike this year, per CNBC. Equities shrugged at the index level — the S&P 500 fell 0.45% to 7,551.81 (+10.11% ytd) and the Nasdaq 100 was essentially flat (+0.02% to 28,945.06) — but broke down underneath it: 332 of 500 names fell against 167 that rose, the average stock down 0.76%. The bond market told a stranger story still: the 10-year held at 5.00% even as the 2s10s spread flattened 6bp to 0.27 and the 10-year breakeven fell 5bp to 2.33% — a hike framed as inflation-fighting that the curve is pricing as growth-dampening.

Mohamed El-Erian framed the live debate as four open questions ahead of the decision, per Fortune: whether the oil-supply shock persists with China as a swing consumer, whether Treasury Secretary Bessent intervenes on long-end yields again, whether Wednesday proves “one and done” or a cycle’s start, and how markets weigh AI’s promise against its risk. Warsh’s own tone answered the third leaning hawkish — a dot plot pointing to more hikes, not fewer.

Our take: A hike that flattens the curve and lowers breakevens isn’t the market cheering inflation-fighting — it’s pricing a Fed tightening into a slowdown that energy, not demand, created. J.B. Hunt’s profit warning over record diesel costs is the tell: the squeeze is fuel, not the funds rate, and Wednesday’s hike does nothing to touch it.

The Wrap’s fed-funds curve pushed further out after the hike — 3.75% implied for September to 4.31% by next February, up from 4.24% priced earlier in the week — while Fear & Greed slipped to 26.5 (“fear”) from 28.7, ahead of Thursday’s industrial production data.

J.B. Hunt sank 13.30% after warning Q3 profit will fall 5–10% on record $6.31/gallon diesel and rising driver costs, per CNBC, while Coinbase fell 10.10% on the hangover from Tuesday’s Senate failure to advance the CLARITY Act even as Bitcoin itself rose. Nvidia (+0.82%) and Intel (+4.03%) carried Information Technology to the day’s best sector (+0.13%), while Goldman Sachs (-3.96%) led Financials to the second-worst.