Before the Bell: Federal Reserve Cuts Rates

The U.S. Federal Reserve has lowered interest rates for the third consecutive time, even as a growing number of policymakers push back against further cuts.

The Fed reduced its policy rate by 25 basis points on Wednesday to a range of 3.50% to 3.75%. Remarkably, 3 of the 12 voting members dissented, arguing against a rate cut. In addition, four of the seven non-voting members favored keeping rates unchanged. Investors were nevertheless pleased, sending the S&P 500 up 0.7%. Adobe (-0.4%) reported strong quarterly results after the close and raised its outlook for 2026, easing concerns that AI might be a threat to the company.

In Asia, the sharp loss at SoftBank (-7.7%) stands out. The group is heavily invested in OpenAI. In Europe, Ontex (-0.2%) drew attention after announcing a CEO transition and issuing a profit warning: the diaper manufacturer will burn cash in 2025 and its leverage will increase further. Ackermans & van Haaren acquired a stake in biotech firm Disco Pharmaceuticals, which is active in oncology research. Sequana Medical (+0.5%) said it completed its first alfapump implantations in Pennsylvania. Later today, we expect quarterly results from Brederode and Broadcom.

Money Doesn’t Grow on Trees

In recent years, there seemed to be no limit to capital expenditures at major tech companies. Meta has funded Reality Labs for years — at a cost of more than 70 billion dollar in losses since 2021. The idea is that the investment will eventually pay off. But what happens if investors start losing faith in those future returns? That doubt may surface today for Oracle. The numbers are spectacular: earnings of 2.26 dollar per share versus an expected 1.64 dollar, cloud revenue up 34%, and an order book of 523 billion dollar thanks in part to a 300 billion dollar deal with OpenAI. But fulfilling that order book will require massive investment. Capex for AI data centers has jumped to 12 billion dollar, 50% above expectations. Don’t be surprised if the stock falls despite the stellar results — investors are increasingly sensitive to rising spending. Meta, for instance, is already cutting 30% of the budget for Reality Labs.

Cisco Finally Breaks a Long-Awaited Record

Do you remember the Four Horsemen of the Nasdaq? They were the late-1990s equivalent of today’s Magnificent Seven: Cisco, Dell, Microsoft and Intel. Cisco surged more than 600% in just two years during the dot-com boom, only to lose 90% of its value after the bubble burst. That’s why yesterday marked a symbolic milestone: Cisco climbed to 80.82 dollar, finally surpassing its dot-com era peak. It’s a reminder of how long the recovery can take when you buy at bubble valuations. Once investor confidence is lost, it can take years to rebuild — in the case of these Horsemen: more than 25 years.

Did you know…

the Fed has rarely seen more than two dissenting votes on a rate decision in its entire history? The last time such disagreement appeared among policymakers was back in 2019.

This article was translated from Dutch and was originally published on Spaarvarkens.be.