Federal Reserve officials reinforced Friday why this week’s rate cut was so contentious. In public comments, one argued that the central bank had room to keep cutting if the labor market softens, and others warned that rate cuts could threaten the Fed’s hard-won work on inflation.

The central bank voted 9-3 Wednesday to cut its benchmark rate by a quarter point, to a range between 3.5% and 3.75%. Two voters favored no cut, and one preferred a larger reduction. It was the first time since 2019 that three policymakers had formally dissented.

One of this week’s dissenters, Kansas City Fed President Jeff Schmid, said Friday morning he opposed cutting rates because he doesn’t see evidence that interest rates are putting downward pressure on inflation by slowing economic activity, on balance.

(WSJ - Continue Reading)

Bond traders are showing signs of indigestion over the tens of billions of dollars they lent this fall to large tech companies, or hyperscalers, to pay for new artificial intelligence infrastructure. Mounting concerns of a potential AI bubble kicked into overdrive after Oracle disclosed earlier this week much higher-than-expected spending on costly chips, networking equipment and other capital expenditures.

Bonds issued by Oracle, Meta and Amazon dominated the corporate debt market this morning with about $1.4 billion of the securities changing hands, according to MarketAxess. The activity accounted for roughly 7% of the corporate bond market's trading volume.

Credit markets have served as a barometer of rising risk in past technology buildout cycles, most notably in the late 1990s and early 2000s when telecommunications companies built out fiber optic and satellite networks, according to research by Bank of America. Selloffs in telecom bonds preceded sharp corrections in stock prices by months, according to the research.

(WSJ - Continue Reading)

The biggest cloud-computing deal in history had the humblest of origins: an unsolicited direct message over LinkedIn. It was sent in spring 2024 from an executive at OpenAI to sales leaders at Oracle Corp. Like most LinkedIn inquiries, it was a bit of a flyer.

OpenAI was scrambling for computing power, as it has been more or less constantly since its artificial intelligence tool ChatGPT burst onto the scene in 2022. It had been busy signing huge deals to rent data center space, buying the specialized AI processors known as graphics processing units, or GPUs, and trying to develop its own chips. Nothing it did was enough to meet its insatiable hunger for processing power. OpenAI, in short, was desperate.

(BBG - Continue Reading)

Official UK figures showed the economy shrank heading into the final quarter of the year as households curtailed spending ahead of the Autumn Budget.

The Office for National Statistics said GDP contracted 0.1% in the three months to October, missing expectations for a flat reading and slipping from growth of 0.1% in the three months to September. It marked the first three-month fall in real GDP since December 2023.

Breaking down the report, ONS director of economic statistics Liz McKeown pointed to a further decline in production alongside stalled services output as the main drivers of the three-month-on-three-month contraction.

Services output was flat, slightly weaker than the 0.1% forecast and down from 0.2% previously. McKeown said contractions in wholesale and scientific research were offset by growth in rental and leasing activity and retail.

(LiveSquawk – Continue Reading)

Post-FOMC, investors should now be asking, “Did the Fed signal a potential top?”

The seeds for this possible topping action, though sprouting for months, could finally bear fruit in early December. Fundamentally, it’s worth noting that markets usually top on the most bullish news, so the interest rate cut by the US Federal Reserve could initiate a “buy the rumour, sell the fact” strategy by speculators attempting to lock-in gains. Also, the Fed’s T-bill buying program, which is scheduled to start today, might not be as bullish as previously perceived and could suggest the economy needs more stimulus than just lower interest rates. Meanwhile, the future path of interest rates seems cloudier than ever, as the Fed’s dot plot (below) suggests extremely divergent views for 2026, and may force investors to reevaluate interest rate sensitive assets.

(LiveSquawk – Continue Reading)