Fed Rate Decision and Meta Earnings: Rates Hold at 3.50% as Meta Stock Slides on AI Spending

Wednesday packed the whole month's story into one trading day. In the morning, roughly $800 billion came off US stocks in the first three hours — a number that sounds apocalyptic on social media until you do the math (it's about 1.3% of a ~$60 trillion market). In the afternoon, the Federal Reserve held its benchmark rate at 3.50% — but with three policymakers dissenting in favor of a hike, a level of open disagreement rarely seen at the modern Fed. And after the close, Meta — the AI boom's biggest spender — reported earnings that missed on profit while raising its spending plans yet again.

Rates on hold, hawks circling, and the AI bill still growing. Here's what each piece means, and what they add up to.

The decision: a hold that didn't feel like one

The vote to keep rates at 3.50% came with three dissents in favor of hiking — the "good family fight" the Fed chair had publicly welcomed. The message from the press conference was blunt: the Fed "won't hesitate" to act against inflation, with the annual rate still at 3.5% against a 2% target and oil above $80 keeping the pressure on.

Markets heard two things at once. The rate didn't move — but the center of gravity did. Three dissents make September a genuinely live meeting: by Thursday, market pricing put the odds of a September hike near 65%, up from about 57% a week earlier, per CME FedWatch data cited by Reuters. And the bond market delivered its own verdict — the 30-year Treasury yield climbed to 5.24% on Thursday, its highest level since 2007. For consumers, that's the practical takeaway — mortgages near 6.5%, credit-card APRs near 24%, and savings yields staying attractive, all anchored not just by the Fed's rate but by a bond market demanding more for lending money.

Meta's report card: growing fast, spending faster

Hours later came the week's most awaited earnings. The results were a study in both halves of the AI debate:

• Revenue: $60.8 billion, up 28% — ahead of expectations. The demand side of Meta's business is genuinely strong.
• Profit: down 14%, with EPS of $6.18 badly missing the ~$7.22 expected. The culprits: $2.4 billion in legal charges, $1.2 billion in layoff costs, a higher tax rate — and operating expenses up 55%, compressing margins from 43% to 31%.
• The AI bill: raised again. Meta lifted the bottom of its capital-spending range to $130–145 billion for the year.
• The verdict: shares sank in extended trading — about 7% at first, deepening past 11% as the earnings call went on. And the context makes it heavier: Meta had already closed lower for 10 consecutive sessions before this report, its longest losing streak on record.

Management pushed back on the skepticism directly — Meta's chief executive told analysts on the earnings call that the company's "AI investments are paying off," pointing to that 28% revenue growth as the evidence. The market's double-digit answer suggests investors want the payoff shown in profits, not just sales.

Put simply: investors love Meta's revenue and increasingly question its costs. This is the same company that, two days earlier, sold 80% of a $14 billion data center to an asset manager and financed it with $12.5 billion of debt — part of a buildout plan so large it now runs through outside capital. Growing 28% and still needing help with the bills is the AI economy in one sentence.

The contrast with Microsoft — which reported the same evening, beat expectations, and saw its shares jump as Azure crossed $100 billion in annual revenue — crystallized the market's new grading system. As Jefferies analysts put it in a note cited by Reuters, Microsoft has "hit the jet stream while Meta is still building the runway."