Warsh's First Test

Fed Chair Kevin Warsh reaffirms the fight against inflation during his first Senate Banking Committee hearing.

Author

Ankit Sinha
July 16, 2026

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Cool Prints, Hot Records

The disinflation victory lap rolled into day two. Wednesday morning’s Producer Price Index fell 0.3% in June, a hard reversal from May’s +0.6%, with goods prices down 1.4%, energy off 6.4%, and diesel doing its best IBM impression at -18%.

That landed just 24 hours after the June CPI posted its largest one-month decline since April 2020, dragging headline inflation to 3.5% YoY from 4.2% and core inflation to 2.6%.

That was the perfect backdrop for Fed Chair Kevin Warsh's debut before the Senate Banking Committee, where he got the full welcome-to-Washington experience, including Elizabeth Warren's opening remarks.

Warsh reaffirmed the Fed's commitment to crushing inflation and offered approximately zero clues beyond that, which markets took as a win: with the funds rate stable at 3.50-3.75%, traders now price roughly 84.5% odds of a hold this month, hike odds have shriveled toward 20%, and the 10-year eased to ~4.57%. In 2026, "no hikes" is the new "rate cuts."

Meanwhile, the AI trade got a fresh breath.

  • ASML lifted its annual sales forecast above Street estimates and announced a 30% capacity expansion, easing fears of chip-equipment bottlenecks.

  • Apple ripped 4% to a record ~$327 after Beijing finally cleared Apple Intelligence for launch in China (full story below), pushing the company's market cap within sniffing distance of $5 trillion.

The banks kept the record parade going.

  • Morgan Stanley printed all-time-high revenue (21.3B vs. $19.62B expected) and EPS ($3.46 vs $2.93), with Investment Management AUM crossing $2T, and threw in a dividend hike for good measure.

  • BlackRock’s assets swelled to a record $15.3T. That’s a day after JPMorgan’s record quarter, where Jamie Dimon called conditions “close to as good as it gets,” which is either a victory lap or a top signal, depending on your therapist.

Tuesday's IBM implosion, the worst day in the company's 115-year history, kept software stocks radioactive, exposing a widening divide between companies selling AI infrastructure and companies watching AI eat their customers' budgets.

And crude's march above $80 on the Iran escalation is quietly rewriting cost structures, as United Airlines' $6B fuel headache made clear after the close. Add it up, and the tape did what the tape does lately:

  • S&P +0.38% to 7,572.

  • Nasdaq +0.62% to 26,269.

  • Dow +150 points.

Peel Take: Here’s the thing about this disinflation: it’s basically an energy story. Gasoline did the heavy lifting in both prints, and the same barrel of oil that gifted us those numbers just caught a war premium north of $80. If the Iran blockade sticks, June’s “mission accomplished” becomes August’s head-fake, and Warsh’s honeymoon gets cut short. Until then, the market’s real religion isn't the Fed, it’s AI capex. ASML is sold out, SK Hynix was 7x oversubscribed, and IBM just told you customers are panic-buying servers while ghosting software vendors. Own the toll booth, not the traffic.

What's Ripe

PayPal (PYPL) 17.2%

  • Stripe and PE firm Advent International lobbed in a $53B+ takeover bid at $60.50/share, a ~28% premium to Tuesday's close, sending the stock vertical.

  • The offer comes with ~$50B in committed bank financing, and the buyers would split ownership 50/50 while keeping PayPal intact rather than stripping it for parts. An initial approach in April went nowhere, but PayPal's board is expected to meet as soon as July 20 to discuss it.

  • Peel Take: Poetic. After two decades of putting everyone’s money on a 3-5 business day hold, PayPal finally knows what it’s like to wait on a decision about its own funds. The PayPal Mafia built the original internet-money empire; now the Collision brothers, who were in grade school when Musk and Thiel cashed out, are bidding on the family restaurant. The stock closing well below $60.50 tells you the arbs still see antitrust risk in payments consolidation.

Apple (AAPL) 4.0%

  • Shares hit a fresh all-time high around $327 after China's cyberspace regulator approved Apple Intelligence for launch, 22 months after Apple started the paperwork.

  • The China rollout runs on Alibaba's Qwen models (with Baidu tech in the mix), and BABA shares popped ~5% premarket on the news. It's Apple's 15th intraday record of 2026, nudging the market cap to the doorstep of $5 trillion.

  • Peel Take: Siri needed a work visa and a translator, but she’s finally in. Jokes aside, this unsticks the single biggest bear case on Apple, an AI-less iPhone in its most important overseas market while Huawei feasted. Now the upgrade cycle argument writes itself, and Tim Cook gets to do what he does best: sell the same rectangle to a billion people, this time with a Qwen-shaped brain.

What's Rotten

Pentair (PNR) 15.0%

  • The water-treatment company slashed both Q2 and full-year 2026 guidance, and the market responded as if it found a leak in the basement.

    CFO Nicholas Brazis resigned in the same announcement, which is never the garnish you want on a guidance cut. The double-whammy vaporized nearly a fifth of the company's value in a single session.

  • Peel Take: A guidance cut says, "We have problems." A guidance cut plus a same-day CFO resignation says, "We need to talk." Markets can forgive soft quarters, but they cannot forgive not knowing how deep the hole goes, and losing the guy holding the flashlight mid-descent is exactly how you end up down 15% on a green tape.

Micron (MU) 8.0%

  • The memory maker tumbled 8.02%, one of the S&P's worst, on fears that Chinese memory chips are getting genuinely competitive. The sell-off torched the whole complex: freshly listed SK Hynix, AMD, and even Caterpillar all fell in unison.

  • The whiplash scoreboard for chips now reads: Monday down, Tuesday up, Wednesday down. Exhausting, even by semiconductor standards.

  • Peel Take: Memory is the most cyclical business in tech: when supply is tight, you print money, and when Beijing's national champions learn to make competitive DRAM, you print apologies. A ~$900 Micron is priced for AI-memory scarcity stretching to the horizon, so even a whiff of Chinese supply gets marked down fast and violently.

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