WS #10040

The Federal Reserve held rates steady at 3.50%-3.75% in its first meeting under new Chair Kevin Warsh, with a unanimous 12-0 vote. The dot plot was revised sharply higher: the median end-2026 rate rose to 3.8% (from 3.4%), implying a 25bp hike this year, and PCE inflation forecasts were revised up to 3.6% for 2026 (from 2.7%). The statement removed any easing bias, citing elevated uncertainty from the Middle East conflict and supply shocks in energy. This is a hawkish hold that contradicts prior market expectations of eventual cuts. The US-Iran deal narrative continues to escalate, with Trump stating the MOU will be signed 'shortly, tomorrow, maybe the next day' and G7 leaders endorsing the deal. However, counter-signals persist: leaked MOU details show $300B to Iran and full UN sanctions relief, drawing bipartisan criticism. Oil stockpiles at the key Cushing hub plunged to critical lows, supporting a bullish oil thesis despite the potential reopening of the Strait of Hormuz. Tropical Storm Arthur threatens the Gulf Coast, adding near-term energy supply risk. On the MAG7 front, Meta's AI buildout rivals AWS/Azure, but a whistleblower accuses IBM of covering up data breaches, and SpaceX shares declined for the first time since its IPO. The Fed's hawkish shift and Iran deal uncertainty create a mixed macro backdrop, with value sectors (industrials, financials, materials) outperforming growth.