Fed keeps interest rates at 4% with tough tone, Alphabet falls with weak search while Microsoft supports cloud

The Federal Reserve kept interest rates at 4% this Wednesday, a date after the September high, but the market treated the decision as a pause with a hard bias. The committee raised the description of economic growth to "strong pace" and repeated that inflation remains high, according to Bloomberg Television news.

The reaction was contained. Stocks gave back some of their earlier gains, interest rates on longer-dated Treasury bonds remained elevated, the two-year yield retreated and the dollar was stable. Members Lisa Cook and Beth Hammack defended another increase of a quarter of a point, according to the broadcaster. The internal debate, according to coverage, is not whether inflation is a problem, but how quickly the Fed needs to react.

Fed Chairman Kevin Warsh tried to reconcile the positions. He said that monetary policy is starting to work, although without firm conclusions on the next step. He also stated that Americans have been living with inflation above the committee's target for almost six years. For Bloomberg, part of the market sees December as a real possibility.

Interest, inflation and the public account

The CEO of DWS in the Americas, Hepsen Uzcan, stated that headline inflation is at 3.7%, largely because of oil, and that core inflation rises at around 2.6%. In his assessment, the Fed does not control oil, but it can prevent the shock from contaminating expectations. The executive said that cash pays off and that bonds pay, but defined cash as a "waiting room, not strategy".

Manager Ken Shinoda, from DoubleLine, was tougher: for him, the Fed should have raised interest rates now, and the market prices a high probability of an increase in December. Shinoda cited oil above $100 and cloud giants' investments in data centers as inflationary pressures, and believes another rise will be needed by March.

Professor Stephanie Kelton of Stony Brook University brought in the fiscal angle. With a deficit of 6.5% of GDP and around US$2 trillion, half of it in interest, she argued that each interest rate rise works as a fiscal expansion, as interest expenses become income for bondholders. In his view, this is a regressive stimulus. Kelton said reducing the deficit would make sense with current inflation, but he doesn't see it on the horizon.

Balance sheets after closing

In the after-market, Microsoft surpassed estimates in revenue and profit, with Azure accelerating from 43% to 48%, according to analyst Gil Luria, from DA Davidson. He highlighted that the company combines revenue acceleration with more measured capex investments, which investors associate with a good return. Capex was below expectations, at US$39.37 billion, against a projection of US$46 billion.

Alphabet followed the opposite path, with a drop of around 9% in the maximum mentioned during the broadcast. Cloud revenue was strong, but search grew 12%, compared to expectations of 15%, according to Scott Devitt of Rosenblatt Securities. For him, it is not a structural problem, but the company is no longer the only option for searching for information. Chief Executive Sundar Pichai said inquiries grew at the fastest rate in five years.

Other results also moved the market. Ford raised the floor of its operating profit forecast to $10.5 billion to $11.5 billion, supported by demand for trucks and SUVs, and warned of possible additional costs of about $2 billion in 2027. ServiceNow shares tumbled about 16%, and Chipotle reported a 2.1% rise in same-store sales, with the CEO describing October as "patchy."

Automatically translated from Portuguese.