The Federal Reserve’s next move is always somewhat of a guessing game. And right now, everyone is busy trying to size up a big Kevin-Warsh-shaped question mark.

The central bank’s first meeting with the new Fed Chair kicks off tomorrow, and nobody quite knows what to expect from Warsh, who was first nominated by President Trump for the position in January and was sworn in last month.

After all, Warsh, who was a Federal Reserve Governor from 2006 to 2011, has built a reputation as a monetary hawk. But in the run-up to taking the top job, he seemed to echo President Trump’s stated view that the Fed should lower rates to give the economy a shot in the arm.

While Warsh assured legislators he’s going to respect the Federal Reserve’s independence, how much fealty he’ll show to President Trump is still an open question. Especially given that Trump turned on his last Fed nominee, Jerome Powell, after he refused to set monetary policy in line with Trump’s demands.

The Fed’s perilous puzzle

One thing’s for sure: Warsh won’t be getting softballs teed up at his first press conference on the job. The Fed is in a particularly difficult position right now. Inflation is accelerating, even without accounting for the energy shock from the Iran war. Yet at the same time, consumer sentiment just hit an all-time low, while credit-card delinquencies just hit their highest level since the financial crisis.

In March, the Fed indicated that it would cut rates by the end of the year. Now, however, some officials are floating the possibility of raising rates at the next meeting, and the vast majority of traders are pricing in that rates will be kept the same.

Meanwhile, the press conference itself will be rich with signals about how Warsh plans to run the place.

“In our view, investors will be watching closely how Warsh characterizes inflation in his press conference (i.e., temporary supply shock or broadening impulse), whether he offers any forward rate guidance at all, how he addresses the committee’s divisions, any language on Fed independence, and whether he introduces his longer-term thesis that AI-driven productivity could justify lower rates,” explained Ameriprise Chief Market Strategist Anthony Saglimbene.

The stakes are high either way: If the Fed decides to eventually hike rates, it could throw cold water on the red-hot AI trade, and threaten the mega-IPOs in the works. But if the Fed fails to control inflation, that could lead to a rerun of the out of control prices we saw only a few short years ago. No pressure, Kevin. —LB

🟢 What’s up

• SpaceX popped 19.6% on its second day of trading, extending the momentum from its blockbuster IPO debut.
• Ferrari rose 3.99% after a Morgan Stanley upgrade highlighted resilient demand for its high-end vehicles.
• Tripadvisor climbed 1.21% after agreeing to sell its European restaurant-reservation business to American Express for $700 million in cash.
• Micron Technology advanced 10.84% as investors returned to the AI trade and renewed focus on memory-chip shortages.
• Space stocks Firefly Aerospace and Rocket Lab gained 4.68% and 6.7%, respectively, after KeyBanc upgraded both names and called the recent sector selloff overdone.
• Storage companies Western Digital and Seagate Technology rose 16.1% and 9.43%, respectively, after Morgan Stanley raised price targets on expectations that AI demand will create a hard-drive shortage.
• Nvidia gained 3.54% as the chipmaker prepared its first investment-grade bond offering in five years, reportedly targeting at least $20 billion.

What’s down

• Fiserv fell 10.91% after CEO Mike Lyons departed to become CEO of Truist Financial.
• Pattern Group dropped 6.49% following the announcement of a proposed secondary offering of 8 million shares.
• Energy giants Chevron and Exxon Mobil fell 3.64% and 4.12%, respectively, as oil prices declined on reports that the US and Iran reached an interim agreement to reopen the Strait of Hormuz.

While all eyes stateside are on the latest round of drama between Anthropic and the White House, JPMorgan’s eyes are on Chinese AI company Zhipu (branded internationally as Z.ai). After JPM raised its price target for Zhipu on Monday, shares rose as much as 48% before last trading around 33% higher.

After the Trump administration ordered Anthropic to bar foreign access to its most advanced models, Zhipu seized the moment and released its latest open-source model. As US AI becomes harder to access and more expensive, investors see Chinese models as a more accessible, cheaper alternative.

Zhipu parent company Knowledge Access Technology is also pulling ahead at home. As demand surges, the firm has raised the fees it charges developers to access its models twice this year, which has allowed it to outpace its main rival, MiniMax. Both businesses went public on the Hong Kong Stock Exchange in January, but since then, Zhipu’s coding and language models have commanded a premium—and its market cap is now nearly four times larger.—AC

Fox just found a new favorite channel. The company announced a roughly $22 billion deal to acquire Roku, funded with a combination of cash on hand and new debt, including a $12 billion loan.

The move expands a media empire that already includes Fox News, Fox Sports, and Tubi, which Fox acquired for $400 million in 2020, and comes seven years after Fox sold much of its entertainment business to Disney in a $71 billion deal.

The ad-vantage

The acquisition doubles down on one of the fastest-growing corners of media: ad-supported streaming. Like Tubi, Roku operates its own free, ad-supported streaming service through The Roku Channel, giving Fox another avenue to reach viewers as consumers increasingly opt for cheaper streaming options. According to Antenna, ad-supported plans now account for nearly half of all premium streaming sign-ups in the US, up from 39% just two years ago.

But Roku’s biggest value may be its distribution. Its software powers smart TVs and streaming devices used by more than 100 million households worldwide, making it the largest connected-TV platform with roughly a quarter of the market. (That footprint allows Fox to push its sports and news programming to cord-cutters).

The financial math helps, too: Fox expects the combined company to generate about $400 million in annual cost savings. The $12 billion loan could weigh on the balance sheet, though, if ad revenue stumbles.

Mixed reviews

Roku shares fell 15.22% today after jumping roughly 20% last Friday when reports of the talks first surfaced, suggesting much of the takeover premium had already been priced in. Some shareholders may also have preferred an all-cash offer.

The deal could also complicate Roku’s role as streaming’s neutral middleman. Roku serves as a gateway to nearly every major streaming service, and some analysts worry rival media companies may be less comfortable relying on a platform owned by Fox.

Whether those fears are justified remains to be seen, as the deal is expected to close in the first half of next year. For now, investors may be changing the channel, but Fox is betting they’ll eventually tune back in.—SY

• The US and Iran have reached a peace deal, which will reopen the Strait of Hormuz. But there’s still a long road ahead for the oil and gas market, according to experts.
• The UK government will ban social media for anyone under 16.
• Anthropic execs flew to DC to smooth things over with the White House after the administration forced the company to restrict its new Fable 5 model.
• Charlie Javice, the startup founder convicted of defrauding JPMorgan, wants a presidential pardon.
• Salesforce acquired Fin, an AI customer-service company, for $3.6 billion.

Forget the World Cup: All eyes (well, econ-wonk eyes) will be on Kevin Warsh’s first Fed meeting, which kicks off tomorrow and runs through Wednesday.