WS #12243

Fed Vice Chair Jefferson's speech at Stanford is the dominant signal in this window, providing a detailed framework for how the FOMC views the overlapping energy and AI shocks. He explicitly flagged the Middle East conflict and AI proliferation as the two significant developments, noting the policy dilemma where dual mandate goals are in tension. Crucially, Jefferson stated that if AI demand effects precede productivity benefits, AI could exert upward pressure on inflation, and that a quick succession of shocks risks inflation becoming entrenched. However, he also said the current policy stance is well-positioned and that the Middle East conflict should have muted effects on US demand given the US is a net oil exporter. This nuanced dovish-hawkish mix suggests the Fed is in a 'wait and see' mode but is alert to upside inflation risks from AI capex and energy. Separately, the AI chip selloff continues with SMCI, ORCL, INTC leading declines, corroborated by FT and social media. SpaceX Starship test flight 13 was aborted moments before liftoff, a minor negative for space sentiment. The FDA investigation into Taylor Farms lettuce supplied to Taco Bell for cyclosporiasis is escalating with over 4,300 cases in Michigan. Alcoa shares tumbled after a cyclone cut into alumina output. The US-Iran conflict remains escalated with a sixth consecutive night of US airstrikes, but Jefferson's comments may partially offset oil supply fears. The dominant narrative is STABLE on the macro front with the Fed signaling patience, while the AI trade continues to de-rate.