Wall Street reacts brutally to Fed chair Warsh’s interest rate hold: ‘the bond market puked on him’

Good morning. On Fortune’s radar today:

Apple at $5 trillion: Extremely, scarily expensive.

Wall Street questions Warsh’s credibility after he left interest rates below the level of inflation, again.

Traders are losing patience with the war: “Whenever reports suggest that diplomacy is working, it probably isn’t.”

Bank of America’s “chicken little worker.”

The White House teleprompter guy who bet on Kalshi loses his job.

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Extremely, scarily expensive: The mundane secret of how Apple, at $5 trillion, became the most valuable company on the planet

Around midday on July 28, Apple stock jumped around 3% to achieve, for the first time, a market cap of $5 trillion, hitting a number that only one enterprise, Nvidia, had ever reached.

In doing so, Apple became something it seldom was before: extremely, even scarily, expensive.

The recent liftoff makes Apple by far the priciest member of the Mag 7, of course excluding Tesla. Its price-to-earnings ratio reached 41.2 on the “$5 trillion day,” between 37% and 145% above the figures for Nvidia (30.2), Amazon (27.7), Meta (21.6), and Alphabet (16.8).

How did the company achieve this? Buybacks. Apple depends heavily on share buybacks to raise its EPS. In fiscal 2024 and 2025 (ended September 30), it spent $185 billion in repurchases, equal to 92% of its GAAP net earnings.

Read the story here: Flirting with $5 trillion, Apple has never been more valuable—or a riskier bet for investors - Shawn Tully

Wall Street is openly questioning Warsh’s credibility after he left interest rates below the level of inflation

The S&P 500 declined 1.52% yesterday after the Fed left interest rates at the 3.5% level, despite the fact that PCE inflation is 4.1% and has been above the Fed’s 2% target for five years. The implication, following Fed Chairman Kevin Warsh’s statements on the hold yesterday, is that traders now expect the Fed to raise rates in September—thus making money more expensive to borrow, which is generally bad for stocks. The Nasdaq 100 is down more than 10% over the last month, and thus in official “correction” territory. The CME Fedwatch index shows that 65% of Fed futures traders currently think Warsh will raise the rate as his next move:

Analysts are harsh on Warsh

The reviews of Warsh’s decision yesterday have been brutal. The negativity began in his press conference, in which finance reporters peppered him with questions on a single theme: If inflation has been too high for five years, why are you doing nothing about it? Neil Irwin of Axios put it most succinctly: “So the Fed-funds rate is now … about 100 basis points below most Taylor rule estimates. You’re hitting your employment mandate. Inflation stays high. Why should rates not be higher today?”

Warsh, referring........

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