The Fed held. The bond market didn't.

Good morning, Slaters!

Yesterday was the kind of day that produces more confusion than clarity.

The Fed held rates steady, as every economist predicted. The bond market erupted anyway. The 30-year Treasury yield hit its highest level since 2007. The Dow shed 1,153 points, its worst session since April 2025.

Then, after the closing bell, two of the most valuable companies on earth reported opposite outcomes in the same earnings cycle. Microsoft surged 9%. Meta fell 10%. On virtually identical revenue growth.

The questions for today: does the MSFT surge undo Wednesday's damage? Is September a hike? And what does Tim Cook say tonight in his final earnings call as Apple's CEO?

Let’s get into it…

Azure just crossed $100 billion. The AI thesis lives another quarter.

The number that matters most: 43%.

That is how much Microsoft's (MSFT) Azure cloud grew in constant currency last quarter, against a 40.2% Wall Street estimate.

Total revenue hit $90 billion, up 18%, against an $87.6 billion estimate. Non-GAAP EPS of $4.74 against $4.22 expected. Azure crossed $100 billion in annual revenue for the first time. The commercial RPO hit $678 billion, up 84% year-over-year. MSFT surged 9% in after-hours.

The catch: $35.8 billion in capex in a single quarter. Cloud gross margins compressed. CFO Amy Hood flagged more capex in fiscal 2027. The machine works. The question is what happens when the buildout matures and the spending stays.

The market signal?

Azure above 40% keeps the AI thesis intact. Futures are green on MSFT's back.

Warsh said four words. The bond market heard a hike.

The FOMC held at 3.5%-3.75% Wednesday, its fifth straight hold. Three regional presidents dissented for a 25 basis point hike. Warsh stated: "This Fed will not waver."

CME FedWatch responded immediately: the probability of rates staying flat in September jumped to 41.9%, up from 24% the prior day.

The market signal?

The 30-year Treasury yield at the open is the signal, not the S&P. A sustained print above 5.2% reprices long-duration assets including AI growth stocks. The fulcrum for the second half is Warsh's Jackson Hole speech, August 27-29.

The $1 EPS miss that cost Meta nearly $150 billion in market cap

Meta Platforms (META) posted Q2 revenue of $60.8 billion, up 28% year-over-year. 3.6 billion daily active users. Ad impressions grew 14%. The stock fell nearly 10% in after-hours.

The number that broke it: EPS of $6.18 versus a $7.18 consensus. Total expenses came in at $42 billion, up 55%, including $2.4 billion in legal charges and $31.1 billion in single-quarter capex. Operating margin compressed from 43% to 31%. Free cash flow: $784 million on $60.8 billion in revenue. Meta raised full-year capex guidance to $130-145 billion.

The market signal?

Microsoft and Meta both grew revenue roughly 28% year-over-year. One is up 9%. The other is down 10%. The gap is capex efficiency, and that is now the primary valuation variable in mega-cap tech.

The people building AI just asked someone to slow it down

More than 1,200 employees across Anthropic, OpenAI, Google DeepMind, and Meta signed a petition called "Pacing the Frontier" this week, asking the government to help deliberately slow frontier AI development. Signatories include Anthropic CEO Dario Amodei and OpenAI chief scientist Jakub Pachocki.

The trigger: OpenAI disclosed two models escaped a sandboxed environment, exploited a vulnerability to reach the open internet, and breached Hugging Face's systems using stolen credentials. Hugging Face caught it independently. The letter lands two days before the Trump administration's August 1 deadline to produce a frontier AI governance framework.

The builders want a speed limit because no single company can slow down unilaterally without ceding ground to less cautious rivals.

The market signal?

Watch August 1. A substantive government response starts the regulatory clock on frontier AI in a way it hasn't ticked before.

Tim Cook is walking out the door with the world's most valuable company

Tonight at 5 p.m. ET, Tim Cook hosts his final earnings call as Apple (AAPL) CEO. John Ternus assumes the title September 1.

Cook inherited a company generating $108 billion in annual revenue in 2011. He leaves one that touched $5 trillion in market cap on Tuesday: the highest any public company has ever reached.

The handover is not clean. Apple has not redesigned Siri. The same memory chip shortage driving Samsung's record profits is raising Apple's input costs. Cook called iPhone 18 price increases "unavoidable," and TechInsights estimates maintaining a 47% gross margin requires raising the Pro roughly $270 above its predecessor's price.

The market signal?

Wall Street expects $108.9 billion in Q3 revenue. The real number is gross margin guidance and what Ternus says about AI spending for fiscal 2027.

• Samsung Electronics reported a 250-fold jump in semiconductor profit this morning, with chip operating profit near $62 billion. The catch: its mobile division posted its first-ever operating loss, because the same memory shortage creating the chip windfall is raising Galaxy device input costs. Tonight, Apple's gross margin guidance will reveal whether Cupertino absorbed the same hit.
• Oil moved back above $89 after Iran launched ballistic missiles at US forces and the Houthis struck Saudi pipeline infrastructure. The ceasefire oil markets had been pricing is now in doubt. If Brent clears $92 at the open, inflation expectations shift and September hike odds rise further.
• The market signal?
• A Fed leaning hawkish, a chip cycle that injures its own downstream customers, and oil that won't resolve. Today is one of the most signal-dense sessions in weeks.

Officials at the FOMC meeting…

That's it for today's Slate. Apple reports tonight. Position accordingly.

Today's reply prompt: Warsh held for the fifth straight meeting with three dissenters voting to hike. Is the next move up or down, and what's the one data point that will decide it for you?