A Hawkish Hold, A Steeper Curve

U.S. equities advanced despite a divided Fed, as three policymakers favored a rate hike while Chair Warsh left markets debating whether officials are pausing or potentially falling behind the curve. The Treasury yield curve steepened sharply after the Fed meeting, with the 30-Year Yield reaching its highest level since 2007 while markets saw higher odds of a September rate hike. The S&P 500 rebounded 1.1% after two weekly declines, while mega-cap technology stocks posted mixed reactions as investors demanded clearer evidence that aggressive AI spending will generate durable earnings. Oil prices retreated, but Strait of Hormuz traffic remained severely constrained, and stalled diplomacy kept the risk of another supply disruption elevated as the Iran conflict continued into August. REITs lagged as rising long-term yields outweighed exceptionally strong earnings. Forty-nine REITs have raised full-year FFO guidance, producing an 83% boost rate, with broad upside across hotels, senior housing, self-storage, industrial, net lease, and office.

U.S. equity markets finished higher this week even as a divided Federal Reserve and another sharp steepening of the yield curve kept financial conditions under pressure. The Fed held its benchmark rate.