Thursday, June 18

The Federal Reserve, in Kevin Warsh’s first meeting as chair, held the fed funds target at 3.50–3.75% but removed prior language that leaned toward cuts and reaffirmed the “ample reserves” operating framework. The updated dot plot erased the previously projected 2026 cut and pushed the median funds‑rate view to about 3.8% — a split committee with roughly nine participants pencilling at least one increase, eight at no move and one at a cut. The statement tied persistent inflation risk in part to energy and geopolitical shocks, a framing that prompted futures to bring forward the first hike to roughly October and produced a sharp bear‑flattening when the 2‑year briefly jumped (~16 bps) on decision day. The move strengthened the dollar versus peers (ECB policy is now comparatively less hawkish) and deferred market expectations for rate cuts into 2027–28. With Juneteenth cash markets closed, immediate follow‑through may be muted, but the policy tilt raises the bar for risk assets and keeps EM funding and bank‑liquidity dynamics sensitive to Fed communications.

U.S. equities staged a notable rebound, with Trading Economics showing the S&P 500 rising about 1.16% to ~7,506 and the Nasdaq outpacing with gains north of 2%; the Dow climbed roughly 300–327 points. Semiconductors and broader tech led the recovery: Intel rallied more than 10% after headlines it secured a new deal with Apple, Micron gained roughly 8% ahead of earnings, and AMD, Broadcom and Nvidia advanced materially. The rally partially unwound Wednesday’s rate‑shock hit to growth names; VIX eased from the high teens as traders digested the Fed’s hawkish dots. Market participants also pointed to the lingering impact of earlier reports that SpaceX would acquire AI coding startup Cursor (≈$60bn), which has lifted private valuations and been cited as a driver of liquidity‑and‑options flows that amplified chips’ volatility. The session showed risk appetite can reassert quickly, but leadership remains tied to concentrated tech flows and event‑driven positioning.

Energy markets eased as coverage of President Trump’s memorandum of understanding with Iran signalled a partial détente that could lessen immediate crude‑supply risk; that development was cited explicitly as one reason equities could rally despite a hawkish Fed. Separately, wire reporting showed Washington issued a sanctions waiver for Venezuela’s state airline Conviasa — a limited move within a broader pattern of calibrated engagement rather than broad oil‑sector relief. The combined effect pushed oil lower in the session, relieving some near‑term inflation upside and providing a counterweight to tighter financial conditions. Policymakers still regard supply shocks, including energy, as a persistent risk, so the détente reduces but does not eliminate the tail‑risk that helped shape the Fed’s communications. The Venezuela waiver keeps the country on markets’ radar as a potential incremental supply and transport link if diplomatic steps continue.