Andrew here. The bond market is falling again after the Fed’s decision to hold rates steady. But the real story is the insistence by Kevin Warsh, the Fed chairman, on letting markets run their course — a vision he telegraphed before getting the job. He also said he wanted a quieter central bank, but for now, there is plenty of short-term noise. More below.

Separately, a report in The Financial Times that the hedge fund darling Situational Awareness — known for its big bets on artificial intelligence — is overextended and seeking new capital serves as a classic reminder that one fund’s trouble can signal broader market stress. Watch this space.

We’re also tracking speculation that SpaceX wants to meaningfully break into the cellular market by acquiring more spectrum. Never count Elon Musk out. But with roughly 80 percent of Americans living in urban areas, that would require a significant ground-based infrastructure buildout (remember: orbital satellites need line-of-sight to a device) and a huge amount of capital.

Mixed messages

Kevin Warsh, the Fed chairman, has said he welcomes “a good family fight” among central bank policymakers. It looks like he’s got one with investors now, too.

Markets are worried that the Fed, which left its benchmark lending rate unchanged on Wednesday in a dissent-filled vote, may be falling behind in its efforts to tamp down inflation.

The latest:

• A sell-off in long-dated bonds, which accelerated on Wednesday during Warsh’s news conference, has continued on Thursday. The 30-year U.S. Treasury bond yield rose to 5.23 percent, the highest since 2007.

• Traders set the odds of a September interest rate increase at 60 percent, and several Wall Street economists predict a series of hikes on the horizon.

• S&P 500 futures are rebounding on Thursday after a late-afternoon swoon Wednesday.

The market is sending a message about the Warsh Fed. The stock and bond moves on Wednesday “were consistent with a central bank inflation credibility shock,” Aditya Bhave, an economist at Bank of America, wrote to investors last night.

Bhave added:

Warsh evaded a lot of questions but made a few starkly dovish remarks. First, he opened the door for looking at other inflation indicators besides P.C.E. Second, he suggested there could be other tools besides hikes to fight inflation. Third, he implied that markets have done some of the Fed’s tightening work for it.

A reminder: P.C.E., or Personal Consumption Expenditures price index, has been the Fed’s preferred inflation gauge, and it has been running hot for years.

Warsh did sound hawkish at times, saying the Fed would not go “soft” on trying to bring inflation closer to the central bank’s 2 percent target. But he offered few details on how policymakers arrived at their 9-to-3 vote to stand pat on rates, or hints about what’s next.

“There was nothing inertial about our discussions, our policy or our strategy,” he told reporters.

The Fed’s mixed messages leave plenty open to interpretation. On Wednesday, President Trump, who has pressured the Fed for years to lower rates, praised Warsh after the policy vote. “I know he’d love to see lower interest ​rates, but he’s got a board, and it’s a political board, ​and they want to keep rates up,” Trump told reporters. “But we fight through ⁠rates.”

What’s next? Investors are likely to pore over the Fed minutes of this week’s meeting, set to be released on Aug. 19, to see what was left unsaid Wednesday about rates policy.

HERE’S WHAT’S HAPPENING

A resumption of strikes in the Middle East adds volatility to the oil market. Brent crude, the international benchmark for oil, was at $90 a barrel on choppy trade, as President Trump vowed to retaliate with a “very hard” round of strikes in response to the latest Iranian attacks.

Beijing threatens to retaliate if Washington blocks imports of Chinese-made robots. China’s commerce ministry said the Trump administration’s proposal to limit robot imports would undermine U.S.-China trade relations. While not mentioning China, the Federal Communications Commission’s effort to restrict imports of humanoid and animallike robots reflects White House fears that the technology could be an espionage and commercial threat.

A hedge fund founded by a former OpenAI exec reportedly scrambles for cash. Situational Awareness, a $20 billion hedge fund founded by Leopold Aschenbrenner, a former OpenAI employee, is looking to raise more capital from investors after taking heavy losses, The Financial Times reports, citing unnamed sources. The fund took a hit from the recent tech-stock rout.

Big Tech’s big spend

Tech stocks are rebounding on Thursday after the Nasdaq 100 closed in correction territory on Wednesday. Investors can thank Microsoft, an artificial intelligence bellwether, for some of that bounce.

But big questions still loom about the A.I. spending spree. Exhibit A: Meta is down sharply in premarket trading.

First, the good news: Shares in Microsoft jumped 9 percent in premarket trading as the tech giant reported big beats on its top and bottom lines. Its quarterly profit jumped 31 percent to $35.8 billion.

Microsoft’s results suggest that its capital expenditures are paying off. Like Meta, Microsoft is spending heavily to build out A.I. data centers. But it is generating significant A.I. revenue from its cloud computing unit, which posted the fastest growth in four years.

Amy Hood, Microsoft’s C.F.O., predicted even faster unit growth in the current quarter. “Customer demand continues to exceed available capacity,” she said.

But Microsoft is holding the line on capex, calming investors worried about ballooning outlays that have strained cash flows at other hyperscalers, including Alphabet.

Hood said the company was sticking to its capex plan for the year. (An accounting change lowered the estimate to $175 billion from roughly $190 billion).

And the less good news: Returns from Meta’s A.I. investments are harder to spot. Despite notching record quarterly revenue, its profit fell 14 percent to $18.3 billion. And it gave disappointing revenue guidance and forecast a higher capital expenditure spend as it grapples with increased costs, especially around its data center buildout.

But Meta plans to keep spending heavily on A.I. The social media giant raised the lower level of its projected capital spending plan to $130 billion, from its April estimate of $125 billion.

At the same time, Meta’s free cash flow has plummeted, to $784 million from more than $12 billion in the previous quarter.

Could Meta make a splash in the cloud sector? Its C.E.O., Mark Zuckerberg, said the company had fielded offers from companies interested in leasing its unused computing power. Meta is in talks to lease excess capacity to Anthropic in a potential deal worth up to $10 billion.

But don’t expect a wave of deals soon: “I also think it would be foolish to basically just sell all the compute and take a short-term profit.”

Why the fashion company Reformation is going public

Reformation, the eco-friendly fashion brand, has attracted celebrity clients like Taylor Swift. Now, it is set to begin trading on Thursday and is trying to win over investors in what has been a challenging segment of the public markets.

The Los Angeles-based company priced its initial public offering at $15 per share on Wednesday, valuing the company at nearly $900 million.

Why now? Reformation’s C.E.O., Hali Borenstein, told Niko Gallogly that the company would use the I.P.O. proceeds primarily to pay down debt and to compensate shareholders.

“At the time of the I.P.O., we will be less than one-time levered,” Borenstein said. In a world of tariffs and geopolitical uncertainty, “that affords us more flexibility,” she added.

Step back. Reformation was founded in 2009 by Yael Aflalo. The brand attracted cool girls to its vintage look, flowy dresses and crop tops. Its sustainably sourced fabrics make many of its items pricier than fast-fashion competitors: Some of Reformation’s dresses typically cost $200 to $400.

In 2019, the company drew significant backing from the private equity firm Permira, which has invested in several other apparel companies, including Dr. Martens, Hugo Boss and Valentino.

Several direct-to-consumer darlings haven’t fared well in the public markets. The share price for AllBirds, the sustainable shoe company, imploded after its 2021 public debut. (It rebranded as an artificial intelligence firm this year.) And the stock of the fashion brand Rent the Runway has collapsed since it went public five years ago.

That Reformation is majority-owned by a private equity firm — such firms tend to be more cost-cutting-oriented than growth-focused venture capital ones — may have put it in a better position for a public market debut than its direct-to-consumer peers. Consider:

• The company’s revenue last year reached $507 million, up from roughly $360 million in 2023.

• It earned $12.6 million in profit — and that’s despite the Trump administration’s tariffs weighing on its bottom line.

• The company has 70 stores globally and plans to double that count in the coming years.

Public retail companies have had a difficult stretch, but there are signs of a rebound, David Swartz, a senior analyst at Morningstar, told DealBook. Recent “results have been better than expected for a lot of these apparel retail companies,” he said. Still, “it’s definitely never going to be easy.”

A Stanford spinoff announces a funding haul

Earnings calls can be intimidating for executives. The stakes are high, and analysts’ questions can be unpredictable. But a start-up called Simile is using artificial intelligence to turn the learning curve into a fast-growing business.

“We can simulate every analyst and predict what questions they would ask,” said Joon Sung Park, its C.E.O.

On Thursday, Simile is announcing a $200 million fund-raising round at a $2 billion valuation, Sri Muppidi is first to report. Greenoaks led the round, which also included the existing investors Index Ventures, Hanabi, A*, Bain Capital Ventures, Definition and CVS Health Ventures.

The company spun out of Stanford last year. The inspiration for Simile came from a 2023 research paper Park co-wrote as a computer science Ph.D. student about A.I. agents simulating human behavior.

To help start the business, he partnered with Lainie Yallen, a start-up veteran, and Michael Bernstein and Percy Liang, Stanford computer science professors.

Simile’s A.I. agents are based on data from human interactions. Simile laid the groundwork for its model by conducting two-hour interviews with 1,000 participants, feeding the data into its model and testing those responses against answers from the human panelists.

The company has since partnered with Gallup and other organizations to bolster its model with data gathered from people around the world. Simile says it has enough data to tap into the A.I.-simulated opinions of specific population groups.

The start-up’s customer base is growing. They include CVS Health, Wealthfront, a financial services app, and the consulting group Deloitte. The company generates revenue partly based on the number of A.I. agents that it models for its customers.

THE SPEED READ

Deals

• Grant Thornton Advisors has agreed to take CBIZ private in a deal that values the rival professional services firm at $5 billion. (WSJ)

• Anglo American is reportedly in discussions to sell its De Beers diamond business for about $1 billion, a fraction of its 2001 valuation when it was taken private. (Bloomberg)

Politics, policy and regulation

Best of the rest

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