The Fed Stood Still, Tech Spent Like There's No Tomorrow, and Wall Street Pretended Everything Is Fine

Wednesday, January 28, 2026

---

The Federal Reserve held rates at 3.5%-3.75%. This was expected. What was not expected—and yet somehow still happened—was for the markets to shrug, the financial media to treat it as a routine event, and three of the largest companies in the world to report earnings that simultaneously impressed and terrified everyone watching.

Let me back up.

At 2 p.m. ET yesterday, Jerome Powell sat down and essentially said: "We're done cutting for now. Maybe ever. But don't worry, we're 'well positioned.'" Two FOMC members dissented—Stephen Miran and Christopher Waller—both voting for another 0.25% cut. Waller's dissent is delicious if you're tracking the meta-game. He's a Trump-approved candidate to replace Powell. You don't vote against rate cuts if you're auditioning for the job unless you think doing so signals something valuable about your independence. Or you're genuinely worried about inflation. Either way, it's positioning.

Powell's language was careful, methodical, and ultimately dovish wrapped in hawkish paper. "Monetary policy is not on a preset course," he said. Translation: "We might cut later, but not now." He noted inflation remains "somewhat elevated"—2.7% by the latest CPI—and that the economy is on a "firm footing." Growth looks stronger. Labor stabilizing. Nothing to panic about.

Futures markets are now pricing in roughly two cuts for all of 2026. Maybe in June. Maybe in December. Maybe never. The uncertainty itself is the message. The Fed has bought time, and it's using that time to watch the data stream in under a Trump administration that would very much like to see rates go down, a Supreme Court weighing Fed independence, and a DOJ investigation into Powell's congressional testimony. Not a "preset course," indeed.

But here's the thing about Fed holds: nobody actually cares anymore. What they care about is what happens next.

---

The Magnitude of the Spending Bet

Tuesday morning, the S&P 500 broke 7,000 for the first time in history. You probably saw a headline about it. It was treated as a nice milestone, a testament to market resilience. Champagne without the crash. But the real story of the day wasn't the milestone—it was what happened after 4 p.m.

Three titans reported earnings. Microsoft. Meta. Tesla.

Microsoft spent $37.5 billion on capital expenditures in Q4 alone. That number exceeded analyst expectations by more than a billion dollars. Fourth quarter capex was supposed to be $36.2 billion. The company, in its infinite confidence, decided to spend even more. Azure grew 39% year-over-year, revenue came in at $81.27 billion (estimate: $80.27 billion), and EPS was $4.05 (estimate: $3.88). By every traditional metric, this was a beat.

The stock fell 4% in after-hours trading.

Why? Because investors looked at those capex numbers and did the math. $37.5 billion in a single quarter. $150 billion annualized? Nobody actually knows. Goldman Sachs estimates the hyperscalers will spend $527 billion on capex this year, with some analysts predicting $140 billion+ just for the AI infrastructure push. For context, that's more than the annual military budget of most nations. It's more than Apple's entire annual revenue.

The question that matters isn't whether Microsoft can afford it. It's whether Microsoft can justify it. And that's where everyone is uncomfortable.

Meta reported that it will spend far more than expected on data centers and AI compute. It's increasing capex guidance above expectations. The company raised Q1 2026 revenue guidance to $53.5-56.5 billion (consensus: $51.4 billion). Fourth-quarter earnings were $8.88 per share on revenue of $59.89 billion. A blowout. Mark Zuckerberg called it a "major AI acceleration."

The stock initially fell as much as 4.7%, then recovered to finish +9% in after-hours.

And Tesla? The company beat on earnings ($0.50 EPS vs. $0.45 expected) and revenue ($24.9B vs. $24.79B expected). But here's the asterisk: annual revenue declined 3% year-over-year for the first time in company history. The automotive business is struggling. Deliveries fell 8.6% in 2025. The company is pivoting to robotaxis and robots (Optimus). Tesla started running its Austin robotaxi service without a safety driver "on a limited basis," and plans to expand to Dallas, Houston, Phoenix, Miami, Orlando, Tampa, and Las Vegas in H1 2026.

The stock rose 3.55% after hours.

So we have three companies—representing roughly $6 trillion in market cap—simultaneously reporting strong earnings and admitting they are betting the farm on the future. They're spending at levels that would have been considered insane five years ago. They're doing it because they believe AI is worth the spend, even if the current returns don't justify the capital allocation.

This is what I'd call a "show me" bet. Wall Street has been shown the earnings. Now it wants to see the product.

---

The Disconnect That Nobody Talks About

Here's what's bothering me, and maybe it should bother you too.

Consumer confidence just hit an 11-year low. An eleven-year low. That's lower than it was during the early pandemic, lower than 2009, lower than the tail end of the Trump first term. Yet consumers are still spending. Powell even said so: "Consumer spending, although it's uneven across income categories, the overall numbers are good."

The wealthiest people are comfortable. Everyone else is pessimistic, but they're spending anyway.

That's a K-shaped economy. That's not "firm footing"—that's a structural fault line.

Meanwhile, health insurers got walloped this week after the Trump administration proposed keeping Medicare reimbursement rates flat year-over-year. UnitedHealth, Humana, CVS Health—all taking shots. The administration is signaling it wants to squeeze the healthcare industry, which is what populists do when they want to appear to be helping regular people while actually just redistributing wealth to whoever has the power to resist.

And gold and silver hit record highs. Both commodities spiked amid what traders called "global economic uncertainty." A winter storm knocked out power to more than 800,000 households. There's talk of a government shutdown by January 31st, with Polymarket pricing it at 80% probability.

So here's the macro picture: The Fed is done cutting, the economy looks strong on paper but fragile underneath, consumers are pessimistic but spending, Big Tech is placing trillion-dollar bets on future productivity from AI, the administration is tightening healthcare margins, gold is hitting record highs, and the government might shut down in three days.

The S&P 500 is up. Nasdaq is up. Tech is up. Everyone's pretending this is normal.

---

What Actually Matters Now

The Powell press conference gave us three things:

1. Patience is the policy. The Fed isn't cutting until the data screams it. Inflation is too sticky. Growth is too strong. They'll wait.

2. Powell is staying disciplined on Fed independence. When asked about the Trump Justice Department probe into his testimony on the Fed renovation project, Powell essentially said: "Not commenting on political matters." He knows the optics. He knows the stakes. He's defending the institutional autonomy of the central bank by refusing to fight back in the media. Smart move. Boring move. Correct move.

3. The committee is fractured on where rates go next. Two dissents is more than it looks like. That's not a committee with a consensus. That's a committee waiting to see which way the wind blows. When Waller votes for cuts while auditioning to be chair, you know the political stakes are high.

Meanwhile, the market is doing what markets do: pricing in the idea that earnings matter more than policy. Tech beat. Mega-cap tech beat even with record spending. The economy is strong enough to absorb that spending. Rates might stay higher for longer, but the returns on capital are still good enough.

Is that right? Ask me again in six months.

For now, the game is: Watch Apple tomorrow. Watch what the other banks do with lending margin. Watch whether the shutdown threat becomes real. Watch whether the Trump Fed chair announcement drops this week as some expect. Watch whether tariffs start hitting companies' margins by Q2.

The Fed stood still. The market moved. Tech spent everything. Powell defended his institution. And nobody seems to be asking the question that matters: What happens when the returns on all this AI spending finally have to materialize?