US shares fell despite a stable Fed decision and major tech results due after the close. The DJIA ended near 48,900, down about 0.6% for a fifth straight loss, while the S&P 500 was flat, the Nasdaq edged up, and the 10-year US Treasury yield moved above 4.4%.
Early headlines centred on Iran after Donald Trump posted an AI-made image on Truth Social after 08:00 GMT. Brent crude rose past $110 and WTI returned above $100, and a report about planning an extended blockade of Iranian ports increased focus on the Strait of Hormuz.
Fed Decision And Rates Outlook
At 18:00 GMT the FOMC held the federal funds target range at 3.5% to 3.75%, as markets had priced a 100% chance of no change. The vote had four dissents, with three wanting removal of easing-bias language and Stephen Miran arguing for a cut, and Powell said he will remain on the Board after his 15 May chair-term end.
After 20:00 GMT, Microsoft said Azure grew 40% year on year, Alphabet reported Google Cloud growth of 63%, and AWS grew 28%, its fastest in three years. Qualcomm rose over 13%, with Automotive revenue up 38% year on year to a record, while Microsoft’s cloud gross margin fell to 66% and Amazon dropped more than 3% in extended trade.
Meta lifted 2026 capex guidance to $125 billion to $145 billion, up from $115 billion to $135 billion, while Alphabet set $175 billion to $185 billion and Amazon targeted about $200 billion. Together, the four firms’ 2026 capex totals about $650 billion.
Key releases due include Thursday’s 12:30 GMT Q1 advance GDP and March PCE, with consensus GDP at 2.3% annualised versus 0.5% prior, headline PCE at 3.5% YoY, and core PCE at 3.2% YoY. Friday brings ISM Manufacturing PMI at 14:00 GMT, with Prices Paid expected at 80.
Positioning And Risk Management
Based on yesterday’s market action and headlines, we are shifting to a defensive posture. The Dow’s fifth straight loss and failure to hold 48,900 shows a clear lack of buying conviction. We should not be looking to buy dips but rather to protect against further downside in the coming weeks.
The geopolitical situation with Iran is now the dominant factor, directly fueling inflation fears. With Brent crude pushing past $110 a barrel, this is reminiscent of the price shocks we saw during previous escalations in the Middle East, which consistently led to stubborn inflation. We believe long volatility is the right trade, as options are still reasonably priced with the VIX index hovering around 16.5.
The Federal Reserve’s divided vote signals a significant hawkish shift that the market has not fully digested. Fed funds futures this morning show traders are now pricing out any possibility of a rate cut in 2026, with a small chance of a hike now priced in for September. If today’s PCE inflation data or Friday’s ISM Prices Paid number come in hot, expect bond yields to climb further and pressure equities.
The story in Big Tech is no longer about growth but about the staggering cost of that growth. The combined 2026 capital expenditure guidance of nearly $650 billion for just four companies is a massive figure that raises serious questions about future profitability. This level of spending, which is approaching the size of the entire U.S. defense budget, is becoming a major headwind for a sector that has carried the market.
Therefore, we are using options to build downside protection on the Nasdaq and S&P 500. At the same time, the direct threat of conflict in the Strait of Hormuz makes call options on energy ETFs like XLE a sensible hedge. The market is fragile, and this week’s economic data could easily turn yesterday’s nervous drift into a more significant correction.
