Markets closed out the week of July 27-31 with the Federal Reserve holding rates, the 10-year Treasury yield pushing to its highest level since January 2025, and a split verdict on Big Tech earnings. Here is what actually moved, and what the data said once the initial headlines settled.
What did the Fed decide this week, and what's the balance sheet doing?
The Federal Reserve held its target range at 3.50-3.75% on Wednesday, July 29, a 9-3 vote with three dissents pushing for a hike instead of a hold. The balance sheet has stabilized near $6.7 to $6.75 trillion, essentially flat since June rather than shrinking further, with securities runoff continuing at roughly $25 billion a month, well below the $95 billion pace quantitative tightening started at in 2022.
The Fed's July 29 statement confirmed the 3.50-3.75% range, unchanged from the prior meeting. Total assets stood near $6.72 to $6.75 trillion through the back half of July, close to where the balance sheet sat in early June, not a fresh $90 billion monthly drop. No meeting is scheduled again until September 16.
Why did the 10-year Treasury yield jump to a 2026 high?
The 10-year yield climbed to roughly 4.67 to 4.70 percent by Friday's close, its highest level since January 2025, while the 3-month bill sat near 3.77 percent and the 20-year yield held around 5.21 percent earlier in the week. That is a steepening curve, not a parallel shift. Short rates stay anchored by the Fed's hold. Long rates are pricing in growth, inflation, and a real chance the next move is up, not down.
The move tracks a sharp jump in hike expectations. CME FedWatch data showed the odds of a hike by the September 16 meeting near 82%, up from about 52% two weeks earlier. Three sitting FOMC members already voted for one this week. The 10-year is behaving like it believes them.
What happened with the yen and the Bank of Japan this week?
The Bank of Japan's policy rate sits at 1.00%, the highest since 1995 after June's hike, yet USD/JPY still traded near 159.4 on Friday. A full percentage point of BOJ tightening this cycle has not been enough to reverse the yen's slide, because the Fed's 3.50-3.75% range still sits more than 250 basis points above it. Rate differentials, not headlines, are still setting the pair's direction.
The BOJ's June 16 decision took its rate to that 1.00% level. USD/JPY has barely budged since. Speculative positioning has stayed heavily net short yen for months, based on the CFTC's Commitments of Traders reports, near the multi-year extremes flagged repeatedly through July. One-sided positioning does not guarantee a snapback, but it raises the cost of being wrong if the rate gap narrows faster than the market expects.
What did Friday's earnings from Apple and Amazon show?
Apple beat on revenue, posting $109.4 billion against roughly $108.65 billion expected, and still fell about 8% on guidance for just 9 to 11% revenue growth next quarter versus 12% consensus, with DRAM and NAND price inflation cited as a drag. Amazon's headline EPS of $5.75 included a one-time Anthropic stake gain, but the number that mattered was AWS revenue hitting $42.2 billion, up 37% and well past the 31% analysts expected, its fastest growth in 18 quarters. Amazon rose roughly 9%.
Same earnings night, opposite market reaction. A beat paired with soft guidance got sold. A beat paired with an accelerating cloud business got bought. That is a market pricing the next quarter, not the one that just closed.
What other market moves stood out this week?
South Korea's Kospi posted its largest single-day gain on record, up 16.8%, days after a separate session where it triggered a circuit breaker on a steep drop, with SK Hynix and Samsung driving both moves. The VIX fell roughly 17% on Thursday as equities rallied into the Apple and Amazon reports. Intercontinental Exchange agreed to buy MarketAxess for $167 a share in cash, a 33% premium, in a deal worth about $5.7 billion.
The Kospi swing needing a circuit breaker for a crash and a record rally inside one week is not a market calmly pricing risk. The ICE-MarketAxess deal is financed with new bonds, term loans, and commercial paper rather than a single bridge facility, pushing ICE's pro forma leverage to about 3.4 times, with a target of paying that down within 18 to 24 months.
What do this week's economic data prints say about the economy?
The Employment Cost Index rose 0.9% for the quarter ending in June, with private-sector compensation up 3.3% year over year, though inflation-adjusted wages still fell 0.4% over the year, the first such decline since 2022. Chicago PMI jumped to 57.6 in July, beating forecasts and marking a third straight month of expansion. University of Michigan sentiment rose to 55.2, with one-year inflation expectations easing to 4.2% from June's 4.6%.
The Employment Cost Index print does not read like a labor market that needs rescuing. Chicago PMI's jump to 57.6 points the same way. Five-year inflation expectations from the University of Michigan survey held at 3.3%, a level that has stayed sticky for months. None of that argues for a September cut. It is closer to the case three FOMC members already made out loud.
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