Yesterday's Selloff Is Already Reversing. The Market May Have Overreacted.

Dow futures are up 400 points. S&P futures gained. Nasdaq futures are up more than 1%. The 10-year yield pulled back to 4.97%. WTI fell below $101.

Jefferies chief European economist Mohit Kumar put it directly. The market may have overreacted to Warsh's tone. The dot plot showed one more hike this year and rates holding flat through all of 2027. Traders were pricing three more hikes over 12 months. That gap between what the Fed projected and what futures priced is where the overnight reversal came from.

Saudi Arabia is offering ship-to-ship crude transfers near Oman to keep Asian refiners supplied while the East-West pipeline is repaired. Oil fell on the news.

Market Implication

The reversal does not change the fundamental setup. Rates are higher. The dot plot signals one more. October odds are at 45%. But the market's initial read of Warsh as aggressively hawkish is being walked back this morning and yields are following oil lower.

Generac Jumped 35% on a $2.4 Billion Amazon Data Center Deal.

Generac Holdings (GNRC) surged 35% in after-hours trading after Amazon (AMZN) signed a deal to buy backup power generators for its data centers.

Amazon also received warrants to purchase up to $340 million in Generac shares at $200.93 each. Initial deliveries are expected to total $2.4 billion across 2027 and 2028.

This is a different kind of AI infrastructure story from the chip and memory narrative that has dominated.

Data centers need power backup. Every server farm Amazon runs requires uninterrupted electricity. A generator deal of this scale signals that Amazon is treating data center reliability as a core capital investment, not an afterthought.

The deal also puts a specific dollar figure on what hyperscaler backup power commitments look like.

$2.4 billion in two years from a single cloud provider is a reference point for how large this market is across all hyperscalers. GE Vernova (GEV), Eaton (ETN), and Vertiv (VRT) all have exposure to the same infrastructure buildout.

Watch whether other hyperscalers announce similar generator agreements in their coming earnings calls. A pattern of large backup power commitments across Amazon, Microsoft, and Google would validate the Generac deal as a sector-wide infrastructure trend rather than a one-off contract.

The Bank of England Held Rates. It Is Now the Outlier Among Major Central Banks.

The Bank of England held its key rate steady, breaking with the ECB and the Fed in the same week. The ECB hiked earlier this month. The Fed hiked yesterday. The BOJ is expected to hike tomorrow. The Bank of England watched all of them and stayed put.

UK inflation jumped to 3.1% in August, its first reading above 3% since March, driven almost entirely by fuel costs. The BOE's argument for holding is that the energy shock is temporary and hiking into it would cause unnecessary economic damage.

That argument is the same one Waller and others at the Fed were making six weeks ago before Warsh's Jackson Hole speech changed the direction.

The divergence has a currency implication. When the Fed hikes and the BOE holds, the dollar strengthens relative to the pound. A stronger dollar makes US imports cheaper and exports more expensive. It also puts pressure on emerging market currencies that borrow in dollars. The global ripple from central bank divergence is running in multiple directions simultaneously.

Central bank divergence is the new macro variable. The BOE holding while the Fed and ECB hike is not just a UK story. Watch how the dollar index reacts into next week. Dollar strength from rate differentials feeds into commodities, EM equities, and multinational earnings guidance.

Trump Called for 1% Rates… Hours After the Fed Hiked to 4%.

Hours after the unanimous Fed vote, Trump posted on Truth Social demanding rates at 1% "or less."

He wrote in all caps: "LOWER THE INTEREST RATES FOR THE UNITED STATES OF AMERICA, AND FAST!"

The current rate range is 3.75% to 4% after yesterday's hike. Trump is asking for a 300 basis point cut from a Fed that just raised rates for the first time in three years and signaled more hikes ahead.

The timing of the post directly after a unanimous vote, including from his own appointees, is the specific tension Warsh now navigates. The unanimity was supposed to give Warsh political cover. Trump's immediate response suggests that cover has limits.

OpenAI separately held early discussions with investors about a new funding round that could value the company at more than $1.2 trillion. That would represent a significant jump from its last valuation. The company said earlier this week it is not going public this year. A private funding round at $1.2 trillion is the alternative path.

Watch Signal

Watch whether Trump's social media posts escalate into formal pressure on Warsh before the October meeting. Any public statement from Warsh specifically defending Fed independence in the days ahead signals he is preparing for a sustained confrontation rather than a one-day news cycle.

OpenAI at $1.2 Trillion Would Be the Largest Private Valuation in History. The Bar Is Now Set.

OpenAI is in early discussions for a new funding round at a valuation above $1.2 trillion. That is roughly double the $600 billion valuation it carried into 2026. It would also make OpenAI more valuable than all but a handful of publicly traded companies anywhere in the world.

The company said earlier this week it will not go public this year due to safety concerns. A private raise at $1.2 trillion is the alternative path to capturing capital without the disclosure requirements of an IPO. Anthropic, which did file publicly, becomes the benchmark for how the market values frontier AI companies in a public setting.

The $1.2 trillion figure also sets a reference point for OpenAI's eventual IPO price. Goldman Sachs (GS), JPMorgan (JPM), and Morgan Stanley (MS) built fee assumptions around an OpenAI listing into their forward guidance. A $1.2 trillion private raise before that listing changes the floor price but pushes the timing further out.

The Read

Every dollar OpenAI raises privately at a higher valuation raises the bar for what its IPO needs to deliver. The capital markets fee calendar that major banks built around an OpenAI public offering keeps getting pushed to the right. Watch whether any bank publicly updates its 2026 fee guidance in response.

Economic Data: Weekly Jobless Claims 8:30am ET | August Housing Starts | Pending Home Sales

Central Banks: Bank of Japan rate decision expected tomorrow

Fed: No speakers. Post-meeting blackout continues.

Earnings: No major earnings today

Overnight: Nikkei +0.33%, Kospi flat, Hang Seng -0.44%, DAX +0.64%, FTSE +0.51%

Yesterday's post-Fed selloff looks like an overreaction in the morning light.

The dot plot was never as hawkish as the initial market read. Oil is falling as Saudi Arabia offers ship-to-ship transfers. The 10-year yield pulled back below 5%.

But the structure has not changed. Rates are higher. October is live at 45% odds. Trump called for 1% rates hours after his own appointees voted to hike to 4%. The BOJ decides tomorrow and a second central bank hike in 48 hours adds another layer to the global rate picture.

The bounce is real. Whether it holds through tomorrow's BOJ decision is the next question.