The Data Arrived
Yesterday the Fed fractured — four dissents, the most since 1992. Three hawks said inflation was too high to signal cuts. One dove said the supply shock was crushing the economy. Powell shrugged, held, and announced he'd stay on the board to constrain his successor.
Today the data answered every question the committee was arguing about. And the hawks won on every line.
Read the scorecard top to bottom. Growth at 2% — not great, not recessionary, definitely not requiring emergency rate cuts. Core PCE at 3.2% — accelerating for the second straight month as $118 Brent works through the price chain. Employment costs rising at 0.9% — the Fed's preferred structural wage measure flashing amber. And claims at 189,000 — the fewest Americans filing for unemployment since Nixon was president.
Hammack, Kashkari, and Logan dissented yesterday because they said inflation was too high to maintain an easing bias. Today's data proved them right on every count. Even Miran's dovish dissent — that the supply shock was hurting the economy — looks wrong with GDP rebounding to 2% and the labor market at historic strength.
$126 and Back
Brent crude spiked to $126 this morning — a wartime high, the highest price in four years — before pulling back to settle at $114. An $18 intraday range. WTI settled at $105. The spike came as Trump doubled down on extending the blockade and rejected Iran's Hormuz reopening proposal. The pullback came as profit-taking met the GDP print.
But the damage in the data is already done. Headline PCE hit 3.5% on the back of pump prices above $4/gallon. Real consumer spending grew just 0.2% in March — nominal spending rose 0.9%, but inflation ate most of it. The savings rate fell to 3.6%, down from 4.5% in January. Consumers are spending down their buffers to maintain living standards.
Five for Five
Apple reported after the close: $2.01 EPS (vs $1.94 est), $111.2B revenue (+17% YoY), China up 28%, and a $100B buyback authorization. Tim Cook's final earnings call as CEO. Every segment set records.
That makes it five for five. All five Mag 7 companies beat this week — GOOGL by 94%, META by 39%, MSFT by 6%, AMZN by 69%, AAPL by 4%. Combined, they demonstrated that the digital economy is accelerating even as the physical economy buckles under $114 oil. The capex paradox holds: GOOGL and MSFT got rewarded for monetizing AI spend. META got punished for spending without proportional revenue — down 7.5% today despite crushing estimates. The market is sorting AI winners from AI spenders in real time.
The Market's Answer
S&P closed at 7,209 — first close above 7,200, new all-time high, best month since November 2020. Every sector advanced. Qualcomm +15%. Alphabet +9%. Caterpillar +10%. Eli Lilly +9%.
The market saw the data and chose optimism. GDP at 2% means no recession. Oil pulling back from $126 meant the energy shock might have a ceiling. Five Mag 7 beats meant the digital economy can power through anything. The 10-year yield barely moved — 4.43%, up 1 basis point — because the data was hawkish but not hawkish enough to force a hike.
The S&P just had its best month since the pandemic recovery. Core PCE is at 3.2%. Oil hit $126. Claims are at a 57-year low. The War Powers deadline is tomorrow. These facts do not belong in the same paragraph, yet here they are.
What the Hawks See Next
Three things converge from here:
One: The rate hike tail is growing. Traders now price a 1-in-3 chance of a rate hike by April 2027 — up from near-zero a month ago. JPMorgan forecasts no cuts in 2026 and a possible hike in Q3 2027. Today's data supports that trajectory. The Fed's next move could be up, not down.
Two: Tomorrow is the War Powers Act 60-day deadline. Trump must either seek congressional authorization, invoke a 30-day extension, or ignore the law entirely. Democrats are exploring a lawsuit. The administration has already pre-positioned its legal defense — that the Iran war isn't new, it's been ongoing since 1979. Constitutional confrontation is coming, but markets aren't pricing it because they've learned that legal constraints don't constrain this president.
Three: Warsh's Senate floor vote is expected the week of May 11. Powell stays on the board as a Governor — blocking Trump from filling his seat and constraining Warsh's incoming regime. The most powerful central bank in the world is about to be run by a chair who was confirmed on a party-line vote, sitting beside a predecessor who won't leave, with a committee that just fractured 8-4 in both directions, receiving data that says growth is fine and inflation is accelerating. Good luck.
Market close Apr 30: S&P 7,209 (+1.02%). 10Y 4.43%. Brent $114.01 (intraday high $126). WTI $105.07. Gold $4,638 (+2%). AAPL $2.01 EPS beat. April: S&P best month since Nov 2020.
GDP and PCE data via BEA. Claims via Bloomberg. ECI via BLS. Oil spike via CNBC. Apple earnings via CNBC and 9to5Mac. Market close via CNBC. War Powers via Al Jazeera.