Rates rattled markets, but the AI trade caught its breath

Good morning, and happy Saturday. The Fed dominated the week. Rates were held at 3.50% to 3.75%, but the vote was 9 to 3, and all three dissenters wanted a hike. Reports that Chair Warsh floated cutting the number of regular meetings from eight a year only deepened worries that investors will get fewer clues about what comes next.

Bond markets showed it. The 10-year Treasury yield posted its biggest monthly rise since March. On Wednesday afternoon the dollar fell, long-term bonds sold off and gold surged all at once, a pattern that typically shows up when confidence in a central bank wobbles.

Stocks had a rough July. The crowd of money chasing AI and tech momentum unwound at the largest scale since 2000, and one AI-focused hedge fund lost 67% of its portfolio value in a month. The month still ended on a better note. Amazon Web Services grew sales 37%, well above forecasts, lifting Nasdaq futures more than 1%, and South Korea's Kospi had its best single day ever, led by chip giants.

Next week's big test is the July jobs report, the key read on where the Fed goes from here. Some analysts warn of an awkward mix: slow hiring alongside a shortage of workers.