The Fed hikes for the first time since 2023 🏦

Welcome back to the Day Trading newsletter 📈

The Fed did the thing.

Wednesday's quarter-point hike was the first since July 2023, the Dow gave up 631 points on the news, and then Thursday morning stocks opened sharply higher and the 10-year yield slipped back under 5% as traders decided the worst of the uncertainty is behind them.

Let’s get into it 👇️ 

📄 The Senate killed the Clarity Act on Tuesday, ending the crypto industry's best shot at a U.S. regulatory framework this year. The procedural vote drew 50 in favor and 49 against, well short of the 60 needed, with Democrats objecting that ethics rules didn't go far enough on the Trump family's crypto profits. Bitcoin dipped below $75,000, its lowest since Aug. 21, while Coinbase and Circle each closed down more than 10%. Sen. Cynthia Lummis had said beforehand that if the vote failed, "it's over" for 2026.

📦️ Generac shares soared more than 40% after hours Wednesday after Amazon agreed to buy its backup generators for AI data centers. Initial deliveries are expected to total $2.4 billion in 2027 and 2028, and Amazon received warrants to buy up to $340 million of Generac stock at $200.93 a share, nearly 3% of the company. The stock was still up more than 30% in Thursday's premarket. It's Amazon's second supplier-equity deal in a week, after a similar arrangement with Qualcomm.

📉 J.B. Hunt plunged 13% Wednesday after warning that third-quarter earnings will drop 5% to 10% from the second quarter. CFO Brad Delco blamed roughly $25 million in added driver recruiting and training costs plus at least a $10 million hit from diesel, which AAA says just hit a record $6.31 a gallon. He called the fuel swings "some of the most radical and abnormal" the company has ever seen. Transport stocks fell in sympathy.

🛍️ Retail sales jumped 1.2% in August, well above the 0.8% Dow Jones consensus, after a 0.5% drop in July. Gas stations (up 3.1%) got a boost from higher prices, but online retailers, electronics and restaurants all posted solid gains, and sales rose 6% from a year ago. With consumer prices up 0.4% for the month, spending more than kept pace with inflation. That's part of why the Fed felt comfortable hiking.

🔼 Intel jumped 5% Wednesday on a Reuters report that SK Hynix is in talks to make memory chips in the U.S. for the first time. One option would have the Korean chipmaker lease part of Intel's Ohio facility; another is a joint venture with major cloud companies. SK Hynix said nothing has been decided. A deal would be a major win for CEO Lip-Bu Tan's push to land marquee customers for Intel's foundry business.

🏡 The average 30-year fixed mortgage rate hit 7.22% on Tuesday, its highest since January 2025, according to Mortgage News Daily. The jump tracks the 10-year Treasury yield, which topped 5% this week for the first time since 2007. Rates are up more than a full percentage point from a year ago, and the pressure showed up Thursday in soft August housing starts (1.275 million) and building permits (1.394 million), both below forecasts.

🏦 The Bank of England held rates at 3.75% on Thursday in a 6-3 vote, breaking ranks with the Fed and the ECB. U.K. inflation rose to 3.1% in August on a 23% surge in motor fuel costs, and the three dissenters wanted a hike to 4% now. Governor Andrew Bailey said the longer the energy shock lasts, "the more likely it is we will need to raise Bank Rate." Markets expect a hike in November.

🔻 Fluence Energy fell 18% after hours Wednesday after cutting its fiscal 2026 guidance for the second time in six weeks. The battery-storage company now expects about $2.4 billion in revenue, down from a $3 billion midpoint, and an adjusted EBITDA loss of roughly $200 million versus a prior midpoint loss of $10 million. CEO Julian Nebreda blamed a slow ramp at its Houston contract manufacturing plant, not demand.

On Wednesday, the Federal Open Market Committee voted 12-0 to raise its benchmark rate by a quarter point to a range of 3.75% to 4%, the first increase since July 2023 and the first policy move of Kevin Warsh's chairmanship.

It reverses the cut the Fed made last December.

The committee's statement was blunt: "Inflation remains elevated," and the hike "will support a timelier return to the Committee's 2 percent goal."

At his press conference, Warsh said inflation has been "too high ... for too long," and that summer's readings "do not tell me that underlying trends have meaningfully improved."

The bigger news was in the projections. Sixteen of 18 officials penciled in at least one more hike this year, and four of those see two.

They also raised their year-end inflation forecasts to 3.7% headline and 3.4% core, up a tenth each from June, and cut the unemployment forecast to 4.1%.

In plain English: the Fed thinks the economy is strong enough to handle higher rates, and that oil-driven inflation from the Iran war is sticking around long enough to be worth fighting.

Markets had priced in the hike (CME FedWatch had it above 90%), so the stock reaction was about what comes next. T

he Dow fell 631 points, or 1.21%, to 51,461.90, the S&P 500 lost 0.45% to 7,551.81, and the Nasdaq was flat.

Banks had their worst day since February on fears that a tightening cycle will choke off deal activity; Goldman Sachs, Wells Fargo, Bank of America and Citigroup all fell more than 3%. The dollar hit its highest level since July 31.

Bonds took it better. The 10-year yield, which touched 5.039% on Tuesday (its highest since 2007), eased after the decision and was down to about 4.94% Thursday morning.

That's the market saying it believes the Fed is serious about inflation, which lowers the premium investors demand for holding long-term debt.

The catch: a 30-year mortgage now costs 7.22%, the highest since January 2025, and that's not coming down just because the Fed acted.

What to watch:

• First, the December meeting. Warsh refused to give forward guidance, but the dot plot says one more hike is the base case, and several strategists expect the Fed to skip October, which falls days before the midterms, to avoid looking political.

• Second, the White House. Hours after the decision, President Trump posted that rates "should be 1%, or less," and told reporters the Fed board is "very hostile" and "very political" and is "raising the rates to make Trump do as bad as they can possibly can do." He also said he still has confidence in Warsh. Whether that lasts through a second hike is the question hanging over every Fed meeting from here.
  

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⚠️ Disclaimer: Not financial advice. Do your research before making any trades.