5 Things You Need to Know to Start Your Day

Traders bet that the Federal Reserve’s cycle of hikes is coming to a close, Meta surges after a rosy earnings report, and hedge fund clients [View in browser]( [Bloomberg]( Traders bet that the Federal Reserve’s cycle of hikes is coming to a close, Meta surges after a rosy earnings report, and hedge fund clients buy into Chinese equities. — [Tiffany Tsoi]( Fed Hike Federal Reserve policymakers [unanimously decided on a quarter point hike](, raising the upper bound of the funds rate to 5.5% — the highest level in 22 years. Chair Jerome Powell left open the possibility of further hikes, signaling that they would be data dependent. Investors are wagering, however, that the Fed has reached the end of its 16-month long policy-tightening cycle — trimming bets on more increases this year. “The market has digested the FOMC decision and the opinion is Powell isn’t more hawkish than before, therefore we’re back to the original peak rate expectation and timeline,” said Mingze Wu, a foreign-exchange trader at StoneX Group in Singapore. Meta Rally Meta Platforms Inc. shares climbed after the [company said second-quarter revenue was $32 billion](, topping forecasts. The tech giant also gave a rosy outlook for the current period, signaling that the social networking firm is succeeding in migrating advertisers to its new Reels. The company is betting on Reels — short-form videos that are similar to what users see on rival TikTok — to draw more attention to its social networks, Facebook and Instagram. The format has succeeded in increasing usage, and is now also helping draw advertisers, reigniting their spending after an industry-wide budget tightening in 2022. Meta’s positive results gave sentiment toward Big Tech a boost. China Investors Goldman Sachs Group Inc.’s [hedge fund clients bought Chinese stocks]( at the fastest pace in nine months on Tuesday, on a net basis, the Wall Street bank said. For Chinese equities, hedge funds net bought nine out of 11 industries tracked by Goldman Sachs. Despite the large purchases, a degree of bearishness remains. The hedge funds’ gross and net exposures to Chinese stocks, as a percentage of the bank’s global prime book, hovered at the lowest level since November, the lender said. Sentiment remains fragile as Beijing has repeatedly fallen short of expectations for stronger economic stimulus and investors have stressed that follow-through and implementation of policy promises [is a must]( to sustain the rebound. Bullish stocks S&P 500 and Nasdaq 100 futures rallied as of 5:06 a.m. in New York. Treasury yields dropped on the short end, while the dollar pushed lower. Oil and gold prices are up. Iron ore, meanwhile, is trading lower. Coming up… Today’s scheduled earnings include Intel, McDonald's, Mastercard, Ford, Vale, Comcast, T-Mobile, AbbVie, Boston Scientific, Bristol-Myers Squibb, HCA Healthcare, Hershey, Honeywell, Keurig Dr Pepper, Mondelez, Lazard, Linde, Roku and Southwest Airlines. At 8:30 a.m., US second quarter GDP data, initial jobless claims, June Durable Goods Orders, and Wholesale Inventories data is coming out. June Pending Home Sales is due at 10:00 a.m. At 7:00 a.m., US MBA Mortgage Applications data is due, and at 10:00 a.m., US June New Home Sales. EIA US Crude Oil Inventories are out at 10:30 a.m. At 11:30 a.m., the US is selling $70 billion 4-week and $60 billion 8-week bills, and at 1:00 p.m., $35 billion 7-year notes. US regulators are also unveiling so-called ‘Basel III Endgame’ bank capital rules today. Joe Biden meets Italian Prime Minister Giorgia Meloni in Washington. This week, the MLIV Pulse survey is asking: Do you think this AI rally resembles the dotcom bubble? Will Nvidia Corp. become the world’s largest company? Are you planning to increase your exposure to tech stocks? Share your views [here]( on big tech and ChatGPT. What we’ve been reading Here’s what caught our eye over the past 24 hours: - [Tesla owners have soured on Elon Musk]( but still love their Model 3s - The skyrocketing toll of the [billion-dollar climate disaster]( - [Mitch McConnell]( freezes for 20 seconds at a news conference - Treasury advisers are [worried about the Bank of England’](s hiking path - Xi protege’s sudden removal adds to a [rough start]( for the leader’s third term - Hamptons [luxury bidding wars hit record high]( even as prices sag - [People are testifying about UFO sightings before Congress]( And finally, here’s what Joe’s interested in this morning… Things have been pretty quiet on the markets and econ front lately. Not much volatility. There's been a growing amount of confidence that a soft landing is possible, and that the waters are calm. Of course, it's kind of a cliche that when everyone is complacent, some risk comes at you from the blindspot, but for now it is what it is. So it also makes sense that yesterday's Fed press conference was one of the quietest in some time, with minimal reaction in the market. There were two interesting nuggets that kind of go together nicely. Early on, in a question from [Jeanna Smialek of the NYT](, Powell said he sees robust consumer activity as a good thing. Basically he doesn't see a recession or a meaningful increase in the unemployment rate as a necessity to defeating inflation. He said later in in the press conference that history does suggest that increases in the unemployment rate, historically, are a product of the inflation fight. But he doesn't seem to think that a materially weaker labor market is inherently a precondition to achieving inflation goals. Then, later, in a response to [Rachel Siegel of the Washington Post](, he was asked to describe the drivers of disinflation heretofore. How much has been monetary policy? How much has been just normalization of the economy (supply chains etc.). His answer is that it has been some of both, depending on which way you slice inflation. He didn't put exact figures on how much has been the result of tightening vs. normalization. So to some extent, Powell believes it is conceivable that we can have more immaculate disinflation. But then the question is, how much can we get still from normalization as opposed to the Fed having to do more work to slow things down. Follow Bloomberg’s Joe Weisenthal on Twitter @[TheStalwart]( Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. Want to sponsor this newsletter? [Get in touch here](. 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