Alphabet spent fifty-one billion dollars in a quarter, ran free cash flow nine billion negative, and two Fed officials voted to raise rates into it. Good morning and welcome to today's market chronicle. It's Thursday, October 29, 2026.
Yesterday's close was another record, the S&P up about a third of a percent, the Dow up a fifth, nobody in any hurry. The Fed held at 3.75 to 4 percent on a 10-2 vote, and the two dissenters, Lisa Cook and Beth Hammack, both wanted a hike. Cook has not dissented once since she took her seat in 2022. Warsh said politics played no role in the decision, the kind of sentence that exists only because the question does, and then declined to say anything at all about December. December hike odds are now around 85 percent. Record close.
Then the bell rang. Alphabet (GOOGL) showed cloud revenue up triple digits and $11.1 billion of operating income there, a soft quarter in search advertising, capital spending of $51.4 billion against $24 billion a year ago, and free cash flow of minus $9.07 billion. The stock is down about ten percent overnight, roughly four hundred billion dollars of market value. Microsoft (MSFT) did the reverse, $92.3 billion of revenue and $18.6 billion of free cash flow, up a few percent. Same industry, same spending story, opposite cash statement.
What nobody is pricing is oil. WTI is above $102, Brent above $115, and the ten-year is sitting at five percent, which is the actual discount rate on every twenty-year data center now being poured. I argued this over dinner last week with someone I traded next to in Geneva for six years, who insisted negative free cash flow is meaningless at a company holding a hundred billion in cash. He is right about the balance sheet. I keep thinking about 1999 to 2001, when the fiber was real and the demand forecasts were early rather than wrong, and the equity went to zero anyway because the financing cost moved first. The parallel half fits. That buildout was debt financed and this one mostly is not, which is the part he won on. For the record I also said in September that oil above $90 was a two-week story.
Ahead of us, GDP and PCE at 8:30, consensus a bit over three percent on the advance third quarter print, core PCE around 0.3 for a September that feels like archaeology. Jobless claims in the same minute. Amazon reports after the close. By 9:45 nobody will remember the GDP number.
No single position earned the paragraph today, which says something about a tape where all the dispersion lives in four companies. The sleeve instead. Mosaic Mid-Horizon last rebalanced on August 13 and has not moved since. The work still open is more Asia exposure and lower fees, duller than anything above it and more likely to matter. It moves when the work is done.
Gold around $4,039, though quotes this morning vary by twenty dollars depending whose stamp you trust. WTI $102.78, Brent $115.32, Bitcoin $79,862.30 and quietly lower all month while nobody writes about it, the ten-year at five percent, S&P futures off four tenths.
A record close and two votes for a hike, on the same afternoon. Have a good one.
Salomon