Fed Holds Rates Steady, but Alphabet’s $400 Billion Slide Steals the Market’s Attention

The Federal Reserve held its benchmark interest rate steady on Wednesday, October 28, in a 10–2 decision that kept the range at 3.75% to 4.00%. The central bank upgraded its view of the economy while noting that inflation “remains elevated”, and Chair Kevin Warsh told reporters the Fed had made clear its willingness and readiness to act. Wall Street took the widely expected outcome calmly: the S&P 500 rose 0.28% to 7,743.97, the Dow Jones added 0.19% to 52,475.10, the Nasdaq gained 0.27% to 26,549.85, and MSCI’s gauge of world stocks rose 0.38% to 1,134.03.

The calm did not survive the earnings releases that followed the close. Alphabet fell 10% in after-hours trading after heavy spending produced a bigger-than-expected cash burn, wiping nearly $400 billion from its market value and dragging Nasdaq futures 0.9% lower. Microsoft moved the other way, rising 3% after beating forecasts on cloud revenue and cash flow. The split captures the new shape of the AI trade: investors still believe in data-centre and cloud growth, but they are no longer willing to fund every company’s spending without question. VanEck’s Jamie Hannah argued that the AI boom itself is now squeezing Alphabet’s traditional advertising business, even as its cloud arm stays strong.

Asia felt the whiplash first on Thursday. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.7%, South Korea’s Kospi dropped 1.2% a day after surging 6.6%, and China’s blue-chip index fell 0.8%, while Japan’s Nikkei managed a 1% gain and Hong Kong’s Hang Seng rose 0.5%. Samsung added to the mixed picture, reporting another set of record earnings on booming memory-chip demand but falling 4% after staying silent on plans to boost shareholder returns — a sharp contrast with SK Hynix, which rose a further 4.6% after jumping 11% the previous day. European futures pointed to a calmer open, up 0.2%.

The rate decision itself still carries a hawkish undertow. Governor Lisa Cook and Cleveland Fed President Beth Hammack both dissented in favour of an immediate quarter-point hike, and markets are still pricing roughly an 80–85% chance of a December increase despite Warsh’s more confident tone on inflation, which sparked a rally in Treasuries. The Fed is not the only central bank moving: the Bank of Canada raised rates for the first time in more than three years, the Reserve Bank of New Zealand shocked markets by holding at 2.75%, and the European Central Bank decides later on Thursday. Brent crude, which closed Wednesday up 1% at $115.32 a barrel on Middle East supply fears, eased 1.2% to $113.91 on Thursday as hopes for revived peace talks resurfaced.

Why this matters is that the market’s verdict is now being delivered company by company rather than by the Fed alone. A hold that was priced in weeks ago cannot lift stocks that are burning cash faster than expected, and a single upbeat cloud report can offset a whole session of caution. What to watch next is Thursday’s US personal consumption expenditures data — the Fed’s preferred inflation gauge, with forecasts centred on a 0.3% monthly rise in the core measure — plus third-quarter GDP, the ECB decision, and earnings from Amazon and Intel later in the day. For readers tracking how central-bank decisions ripple through currencies, our forex section explains the transmission, and the forex tools page helps size positions when volatility spikes. (Not financial advice.)