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

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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