Fed Minutes Point To One More Increase, And Rates Split Two Ways

The Federal Reserve's minutes said on Wednesday that most officials expect one more interest rate increase this year, on a day when the bond market went two ways at once: short-term borrowing costs fell while long-term ones rose. Stocks slipped a day after the S&P 500's first close above 7,800. Oracle, Broadcom and SpaceX are also in talks to borrow tens of billions of dollars to buy AI chips, and governments reached for more ways to get diesel to market.

Fast Facts

• Levi Strauss raised its full-year forecast for adjusted earnings to $1.54 to $1.56 a share, up from $1.46 to $1.52, after third-quarter revenue grew 4% to $1.6 billion (Read More)
• Shares of the trading app Webull were down about 20% in Wednesday trading after lawmakers flagged its ties to China's government, on track for the stock's worst day since April 2025 (Read More)
• Microsoft unveiled a new class of Nvidia-powered Windows laptops built to run demanding artificial-intelligence programs on the machine itself instead of in the cloud (Read More)
• The Department of Housing and Urban Development opened a probe into Wells Fargo's efforts to boost Black homeownership, calling race-based lending a potential violation of the Fair Housing Act (Read More)
• Staffing and enforcement have dropped sharply at the Commodity Futures Trading Commission, which is writing new rules for crypto and prediction markets (Read More)
• Data centers would shoulder new costs and restrictions under bipartisan legislation that would also speed up the energy infrastructure needed to power them (Read More)

Global News

• German exports fell 0.8% in August from July, and shipments to the United States dropped 6.3% on the month, according to Germany's statistics office (Read More)
• More than 60% of Hong Kong's third-quarter stock market debuts are trading below their offer prices, and cooling interest from cornerstone investors, the big backers who sign up before a listing opens, has pushed some October listings back, sources told the South China Morning Post (Read More)
• Israel's economy is forecast to grow 4% this year, three years after the October 7 attacks, with its defense-technology startups playing a big part (Read More)
• Vodafone raised its cost-savings target for its British unit, VodafoneThree, to €1 billion by the year ending March 2032 (Read More)

The Fed's Minutes Point To One More Increase, And Short And Long Rates Split

On Wednesday afternoon the Federal Reserve released the minutes of its September 15-16 meeting, the written account of what the Federal Open Market Committee (FOMC), the officials who vote on interest rates, discussed. At that meeting the committee voted 12-0 to raise its target range for the federal funds rate by a quarter point, to 3.75% to 4.00%. That is the rate banks charge each other overnight, and it is a benchmark for borrowing costs across the economy. This was the committee's first increase in more than three years. The minutes say most participants judged that another increase "would likely be appropriate by year end."

Stocks slipped off a record: the Dow fell 0.7%, and the S&P 500 and the Nasdaq each lost about 0.2%. Our Tuesday briefing followed the 10-year yield, the annual return for lending to the government for a decade, to a 24-year high, and on Wednesday it set another during the session before paring back. A $39 billion auction of new 10-year notes, the public sale where lenders' bids set what the government pays, cleared at the highest yield for that sale since November 2000. Demand was strong, though, and Investing.com reported that it helped pull yields back. Treasury's end-of-day figures for Wednesday's session show the split. The 2-year note fell two hundredths of a percentage point, what traders call two basis points, to 4.77%. The 30-year bond rose three, to 5.67%. The 10-year note rose one, to 5.28%.

A 2-year note is close to a bet on where the Fed will set rates over the next two years, so it moves on every hint about the next meeting. A 30-year bond carries that bet plus a term premium, the extra return lenders demand for tying money up for decades while a lot can change. The minutes report that market commentary pointed to "competition for capital from heavy private debt issuance to finance the development of artificial intelligence (AI) infrastructure" as contributing to higher term premiums. Companies borrowing to build data centers would be chasing the same lenders as the Treasury. That is the commentators' reading, as the minutes record it, not the officials' own.

The minutes also say participants "approached each meeting with an open mind." The Wall Street Journal's read is that officials made no urgent case for an immediate follow-on increase, and some top officials have suggested a further rise can wait until December.

Sources: FOMC minutes · WSJ on the minutes · Investing.com · Yahoo Finance · U.S. Treasury · Rapunzl on Monday's 24-year high

Three Companies Are Asking Lenders For Tens Of Billions To Buy AI Chips

The Wall Street Journal reported Wednesday that Oracle, Broadcom and SpaceX are each in talks on debt deals to pay for AI chips. Broadcom is seeking more than $50 billion to finance custom chips for OpenAI, in early talks with the lenders Apollo and Blackstone. Oracle is negotiating with Apollo and Goldman Sachs to pay for the hardware in a 1-gigawatt data center. SpaceX has approached lenders about a $40 billion debt structure to buy Nvidia processors, and its shares were down 2% in early trading Wednesday on the report. None of these is a finished deal; the targets are year-end.

Oracle's version has an unusual shape. Investors would fund a separate company that buys the chips and leases them back to Oracle. The loan sits on that company's books, not Oracle's, which is why it is called off-balance-sheet. Oracle pays rent on the chips instead of carrying the debt. Our briefing last Friday covered Amazon weighing a move of $8 billion of Nvidia chips into a separate company. Whatever the structure, lenders have a finite pool of savings, and every borrower competes for it, so a wave of new corporate borrowing nudges up what everyone pays, the government included. The Fed's minutes, covered above, record market commentary linking this kind of AI borrowing to higher Treasury yields.

The same minutes show where that competition reaches a household. Financing conditions, they said, were "somewhat restrictive for residential mortgage borrowers and small businesses," meaning tight enough to hold borrowing back. A family applying for a home loan and a shop owner seeking credit draw on the same pool of savings these three companies now want tens of billions from.

Sources: WSJ · Investing.com · Yahoo Finance · Federal Reserve · Rapunzl on Amazon's Nvidia chips

Governments Reached For More Diesel Levers, And Oil Stayed Above $100

Our Monday briefing covered the Group of Seven agreeing to tap emergency fuel reserves. On Wednesday, governments went further and aimed at diesel specifically. The International Energy Agency, which coordinates emergency oil stocks among its member countries, agreed to speed up the release of those stocks and prioritize diesel. France said it would release 10 million barrels of diesel from its own emergency stocks, and Prime Minister Sébastien Lecornu confirmed it in an address to the nation. In the U.S., President Trump temporarily allowed dyed diesel, a fuel normally restricted to off-road farm and construction vehicles, onto highways. Brent crude, the global oil benchmark, still rose 0.7% to $100.93 a barrel on the day, though U.S. stocks came off their lows as oil pared its gains.

Why diesel, specifically? It moves the trucks, trains and farm machinery that carry nearly everything else, so its price leaks into the cost of goods that never go near a fuel pump. The Fed's minutes drew the same line: "Many participants assessed that the longer energy prices remained elevated, the greater the risk that cost increases in certain sectors could lead to broader price pressures." Broad price increases across the economy are inflation, and inflation is what the Fed raises interest rates to fight. An emergency release adds supply now; the waiver widens which fuel can legally be sold for highway use. Neither changes how much oil leaves the Middle East.

Sources: Investing.com · France 24 · NPR · Federal Reserve · Rapunzl on the G7 release

What To Watch

PepsiCo is the largest company on today's earnings calendar, and analysts' average estimate is $2.29 a share in earnings. Novagold Resources and Nurix Therapeutics are also on the calendar. President Trump is scheduled to attend a White House summit today on science driven by artificial intelligence.

Delta Air Lines is expected to report on Friday at an average estimate of $1.80 a share, a read on travel demand with oil above $100. Next week the major banks, JPMorgan Chase and Bank of America among them, are expected to open the third-quarter earnings season.

On the Fed calendar: Governor Christopher Waller is scheduled to discuss AI at the Bloomberg New Economy Forum on October 13. The Beige Book, the Fed's roundup of business conditions reported by its twelve regional banks, is due October 14 at 2:00pm, the same day Vice Chair for Supervision Michelle Bowman is expected to speak twice in Bangkok. Chairman Kevin Warsh is set for a conversation with IMF Managing Director Kristalina Georgieva on October 15. The committee's next meeting runs October 27 and 28, and the Bureau of Economic Analysis is scheduled to publish GDP and the personal income and spending report the next morning at 8:30am ET.

The Classroom Takeaway

The minutes show a central bank telling markets where it probably goes next without promising anything, and the 2-year note is where traders act on hints like that, long before any decision is made. Setting the rate yourself and watching what follows is the quickest way to see why, which is what Run the Fed lets a class do.