Kevin Warsh has spoken, and his first act as Fed Chair was to take away the market's favorite story: the rate cut.

The Fed held for a fourth straight time, exactly as expected, but the projections underneath it flipped hawkish, with more officials now penciling in a rate hike this year than a cut.

Stocks did not love it, the Dow dropped 507 points, and the year-long bet on cheaper money suddenly looks a lot lonelier.

Let's catch you up.

🦅 The Warsh Fed holds again, but the dot plot flips toward a hike
📉 The Dow sheds 507 points as Big Tech drags markets into a risk-off day
⚛️ A pre-revenue nuclear bet is today's AltIndex Stock of the Day
🤖 Databricks tops $6.9 billion in revenue as Uber's robotaxis head to Houston
💰 Caterpillar lifts its dividend 8% for a 32nd straight year

Let's get into it.

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For most of this year, the trade was simple: wait for the Federal Reserve to cut rates, and watch bonds and dividend stocks catch a bid. On Wednesday, in his first meeting as Fed Chair, Kevin Warsh ended that trade.

The Fed held its benchmark rate at 3.5% to 3.75% for the fourth straight time, in a unanimous vote, exactly as the market expected. With a decision this telegraphed, the number is never the story. What matters is what the new Chair does around it, and Warsh used his debut to send a message.

He scrapped the Fed's forward guidance entirely and declined to pencil in a rate projection of his own, a clean break from the Powell era and a sign this will be a quieter, more tight-lipped Fed that telegraphs less.

Then came the part markets were waiting on: the dot plot. The committee that spent all year sketching in a cut has flipped. Of the 18 officials who submitted projections, eight see no change this year, nine see at least one hike, and exactly one still sees a cut.

Warsh also raised the Fed's own inflation forecast to 3.6%, up from 2.7%, while trimming the growth outlook to 2.2%. Keep that projection separate from the actual print, which is hotter still: consumer prices rose 4.2% in May, the fastest in three years.

Stop waiting for cheaper money. It may not be coming.

Here’s what we're watching now. Earlier this year, the bet was that falling rates would lift bond prices and rate-sensitive dividend names. With the dots tilted toward a hike and no guidance to lean on, the steadier ground is locking in today's still-high yields rather than chasing a rate-cut-driven rally (which the Fed just warned against). Short-to-intermediate Treasuries, money-market funds, and T-bill ladders pay well to park your money in them, and dividend stocks can often ride out a higher-for-longer stretch. The next inflation print is the tell: another month near 4% and that one lonely rate cut vote starts to look very alone.

Stocks closed sharply lower Wednesday in a broad risk-off session. The Dow fell 507 points to 51,492, down 0.98%, while the S&P 500 lost 1.21% to 7,420 and the Nasdaq dropped 1.34% to 26,021. Big tech led the decline, with Microsoft down 3.8% to 378.85, and the VIX volatility gauge jumped more than 12% as traders moved to the sidelines. However, futures are pointing higher this morning, with chips leading a rebound and oil easing after the Iran deal.

On a day when almost everything closed red, one blue chip leaned into the income theme. Caterpillar rose 1.11% to lead the Dow, and the machinery maker is raising its quarterly dividend 8% to $1.63 a share, its 32nd straight year of increases as an S&P 500 Dividend Aristocrat. With rate cuts looking further off, durable dividend growers like Caterpillar are back in focus for income investors. The new payout is payable August 19 to holders of record July 20.

The chip trade that powers this whole rally is roaring. Intel has jumped about 11% this morning, extending Wednesday's pop, after President Trump said Apple agreed to use Intel's US foundry to make chips, a major vote of confidence on top of Intel moving its newest 18A-P manufacturing process into trial production. The strength is sector-wide: Broadcom is up around 4%, Micron roughly 6%, and AMD near 3.5%. Insatiable demand for semiconductors has underpinned the market's record run, and this morning it's leading the bounce.

Wholesale inflation ran hot in May. Producer prices rose 6.5% year over year, the fastest pace since November 2022, with energy doing most of the damage as wholesale gasoline jumped 23.4%. It's the same inflation backdrop now pushing the Fed to talk about hikes instead of cuts.

The SpaceX trade finally took a breather. Shares of the newly public rocket and AI venture fell nearly 5%, their first down day since the IPO, snapping a three-session surge that had carried the stock roughly 58% above its offering price. The pullback has not scared off the crowd: retail investors have bought $369.8 million of SPCX over the past three sessions, per Vanda Research, a pace with few precedents among recent market debuts.

Meta got a fresh reminder that its biggest risk may not be on the income statement. The stock slid 3.3% to $580.47 after a group of Italian families filed the country's first collective lawsuit against the company, alleging its recommendation algorithms harmed minors, including a 12-year-old girl who died by suicide. With more than 2,400 child-safety cases already pending in US federal court and a major trial ahead, investors are widening the legal-risk discount on the stock.

*Note: Markets will be closed tomorrow, Friday the 19th for Juneteenth.

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