Today’s Market Recap: Fed Dissent and AI Capex Surges Define Volatile Earnings Week

Jerome Powell’s "farewell meeting" saw the greatest internal division in 34 years as the Federal Reserve opted once again to keep interest rates unchanged. However, four voting members opposed the official policy statement. Powell clarified that he will remain on the Federal Reserve Board of Governors rather than acting as a "shadow chair," noting that the four dissenting votes indicate the committee’s focus is shifting toward a more neutral stance.

Donald Trump has rejected an Iranian proposal, stating that the naval blockade will persist until a nuclear deal is secured, while Iran warned of "unprecedented" military action in response. According to U.S. media, Trump described the blockade as "in some ways more effective than bombing." The U.S. military has reportedly drafted plans for a "brief but powerful" strike against Iran to break the current stalemate. Crude oil prices surged over 7% during intraday trading as Trump urged Iran via social media to "make a wise decision quickly." According to Iranian media, officials stated that the military's restraint thus far was intended to provide space for diplomacy and give Trump an opportunity; however, they warned that if their conditions are rejected, the "enemy will soon face a very different response."

U.S. durable goods orders rebounded sharply in March as the AI investment boom continued, with core capital goods orders marking their largest increase in nearly five years. Excluding aircraft and defense equipment, core capital goods orders jumped 3.3% month-over-month, significantly exceeding market expectations of 0.5% and marking the largest single-month gain since mid-2020. This year-long strength in capital investment is driven partly by the sustained corporate build-out of artificial intelligence infrastructure.

Microsoft (MSFT)'s revenue grew beyond expectations last quarter, fueled by a 40% surge in Azure cloud income, despite an unexpected slowdown in capital expenditure. In the third fiscal quarter, revenue rose 18% year-over-year, while EPS grew 23% — beating analyst estimates by over 5%. Annualized AI revenue surpassed $37 billion, up 123% year-over-year, and commercial Remaining Performance Obligations (RPO) doubled. While Intelligent Cloud revenue grew 30%, Azure’s performance slightly beat forecasts, even as the segment's margin fell 1.8 percentage points. Capital expenditure growth slowed to 49% from the previous quarter's 66%, dropping nearly 15% from its record high. Performance in Windows and Xbox remained weak, with More Personal Computing revenue down 1%, though search advertising revenue rose 12%. Shares initially fell over 3% after-hours before recovering.

Google’s parent company, Alphabet (GOOG), saw Q1 revenue grow by a better-than-expected 22%, with AI driving gains across multiple business segments and cloud revenue soaring 63%. First-quarter revenue rose to $109.9 billion (against expectations of $107.1 billion), while net profit surged 81% to $62.6 billion, aided by $36.9 billion in non-liquid equity gains. The CEO remarked that "AI is lighting up every corner of the business," as search volume hit record highs. Google Cloud’s order backlog nearly doubled quarter-over-month to over $460 billion, and Gemini’s paid monthly active users grew by 40%. Alphabet shares rose 6.63% in after-hours trading.

Meta (META)’s Q1 revenue increased 33%, slightly exceeding expectations, but the company raised its full-year capital expenditure forecast to a maximum of $145 billion. First-quarter revenue reached $56.3 billion (versus the $555.1 billion analyst estimate) and net profit hit $26.8 billion, representing year-over-year growth of 33% and 61%, respectively. Due to rising prices for hardware components, the company increased its annual capex guidance to between $125 billion and $145 billion. Meta's stock fell nearly 7% in after-hours trading following the announcement.

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