Gold prices are sending a message, but Federal Reserve Chair Jerome Powell isn't listening. The central bank chief says the precious metal's surge isn't about inflation risks, but investors shouldn't be too quick to dismiss the link.

The Fed's decision to hold interest rates steady Wednesday wasn't much of a surprise, so Powell's comments were the focus of attention. A more upbeat tone on the economy, minimizing both labor and inflation risks, means traders expect the central bank to freeze its benchmark rate at the current 3.5% to 3.75% level for several months. The S&P 500 slipped below 7000, but the overall stock market mood is still buoyant.

However, for all the cheer, Powell couldn't entirely mask market concerns. Asked about gold's recent jump, he dismissed it -- "the argument...that we're losing credibility or something, it's simply not the case" -- pointing to longer-term inflation expectations being consistent with the central bank's 2% target.

So is the gold price really disconnected from inflation fears? To be fair to Powell, there are various factors driving the yellow metal's gains. Speculative trading, retail and central bank demand, and geopolitical risks -- with President Donald Trump warning of a "massive armada" heading toward Iran -- are contributing to its move above $5,500 an ounce on Thursday.

But it stretches credibility to think gold's gains have nothing to do with expectations of rate cuts under the next Fed chair after Powell's term ends in May and the potential resulting inflationary pressures. After all, a potential candidate to lead the central bank, Governor Christopher Waller, was one of two dissenting votes on the Federal Open Market Committee calling for a rate cut Wednesday. Inflation expectations might shift quickly if the market feels a new Fed chair is vulnerable to political pressure from the White House to reduce borrowing costs.

Powell is walking a tricky line in his final months as Fed chair of defending the central bank's independence while also looking to maintain market calm. He might choose to turn a blind eye to gold's signal but that doesn't mean investors should.

-- Adam Clark

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***

The Fed Can Wait. Powell Is Confident on Economy.

Jerome Powell's term as Federal Reserve chair is winding down with him seeing the economy on a firm footing, suggesting a lengthy pause in interest-rate cuts after holding rates steady on Wednesday. Monetary policy is close to neutral, he said, risks look more balanced, and there's little urgency to cut.

   -- Fed governors Christopher Waller and Stephen Miran dissented to holding 
      rates steady in favor of another quarter-point cut. The Fed cut 
      three-quarters of a percentage point in the second half of 2025. 
      Yesterday, the policymakers noted growth was solid, an upgrade from their 
      assessment in December. 
 
   -- Wednesday's policy statement also said job gains remain low but the 
      unemployment rate has shown signs of stabilization. The Fed dropped 
      language that had pointed to rising downside risks in the labor market, 
      though they noted inflation remains somewhat elevated. Policy is well 
      positioned to respond as data evolve, Powell said. 
 
   -- Morgan Stanley and Macquarie analysts read Powell's remarks during the 
      press conference as reinforcing a longer pause, even though many Fed 
      watchers expect modest easing later this year, after Powell's term as 
      chair ends in May. Powell's tone on the economy was more upbeat than it 
      has been in months. 
 
   -- If Powell sounded upbeat about the economy, he was careful in discussing 
      politics. He declined to comment on Justice Department subpoenas, any 
      criticism from the White House, the value of the dollar, or his plans for 
      when his term as chair ends. He did emphasize the importance of Fed 
      independence. 

What's Next: One issue drew a longer response. Asked why he attended Supreme Court oral arguments in the case involving the Trump administration's efforts to remove Fed governor Lisa Cook, Powell said it would have been harder to explain staying away than showing up.

-- Nicole Goodkind and Janet H. Cho

***

Meta's AI Spending Is Set to Spike 41% This Year

Meta Platforms is dramatically raising its artificial intelligence spending goals for the year. Fourth-quarter expenses rose 40% about half tied to a hiring spree. For the full-year 2026, Meta sees expenses rising by 41% at the midpoint, with capital expenditures hitting between $115 billion and $135 billion.

   -- The capex is being used to build AI data centers, all for Meta's use. As 
      he has for a year now, Meta CEO Mark Zuckerberg began his prepared 
      remarks on the earnings call by running down where he sees the return on 
      investment from the spending surge. 
 
   -- He wants to build new AI-based experiences for the 3.6 billion people who 
      use Meta apps, including Facebook and Instagram. In an AI age, Zuckerberg 
      believes these experiences are table stakes if Meta wants to keep users 
      coming back every day. Meta is also using AI to improve ad targeting. 
 
   -- Meta CFO Susan Li told analysts it has used AI to improve systems that 
      recommend content to users that keeps them engaged on the platforms and 
      the system that targets users with personalized ads. Paid messaging on 
      WhatsApp passed a $2 billion annual run rate in the fourth quarter. 
 
   -- Microsoft also has been spending enormous amounts of money on its AI 
      infrastructure. Capital expenditures for the second quarter were $37.5 
      billion, above Wall Street's consensus estimate. CEO Satya Nadella said 
      they are only at the beginning phases of the "AI diffusion." 

What's Next: Meta has yet to release the successor to Llama 4, the large language model it released last year. But some believe a new model is coming, The Wall Street Journal reported, which cited an internal Q&A that puts the timeline in the first half of 2026.

-- Adam Levine and Angela Palumbo

***

At Tesla, the Future Is All About Artificial Intelligence

Tesla's earnings conference call was all about artificial intelligence. Analysts focused almost exclusively on self-driving cars, robots, AI chips, and Tesla's new xAI investment. CEO Elon Musk delivered what he called "sad" news, saying the company plans to end production of the Model S and X vehicles.

   -- It will be expensive. Tesla is planning to spend $20 billion on new 
      plants and equipment in 2026, CFO Vaibhav Taneja said, up from about $8.5 
      billion in 2025. The guidance is about $10 billion above expectations and 
      higher than the record $11 billion spent in 2024. 
 
   -- The factory capacity used to produce Model S and X cars will be used to 
      make robots instead, Musk said. Meanwhile, Tesla agreed to invest 
      approximately $2 billion to acquire shares of Series E Preferred Stock of 
      xAI as part of their recent publicly-disclosed financing round. 
 
   -- Tesla's robo-taxi service can cover 25% to 50% of the U.S. population by 
      the end of the year, pending regulatory approval, according to Musk. That 
      is encouraging, although he said something similar about 2025. 
 
   -- Tesla plans to offer a robo-taxi service in the first half of 2026 in 
      seven new cities: Dallas, Houston, Phoenix, Miami, Orlando, Tampa, and 
      Las Vegas. The populations of those metro areas, plus Austin and San 
      Francisco, where Tesla currently operates robo-taxis, total about 11% of 
      the U.S. population. 

What's Next: Tesla has 1.1 million customers for its Full Self-Driving option. About 70% of those paid a one-time fee for it. Tesla recently ended the one-time fee, opting for a $99 a month subscription model. Tesla hopes that FSD-enabled Tesla vehicles will one day be used in an Airbnb-type robo-taxi network.

-- Al Root

***

Oil Hits 4-Month High Amid U.S. Iran Tensions

Oil prices hit a four-month high early Thursday as global markets became increasingly concerned about tensions between the U.S. and Iran.

   -- Brent crude futures topped $69 per barrel early in the day, while West 
      Texas Intermediate reached $65 -- both at their highest levels since 
      Sept. 26. Oil prices are up around 13% so far in 2026. 
 
   -- It comes amid mounting geopolitical risks, and particularly the threat of 
      escalating hostilities between the U.S. and Iran. President Trump is 
      weighing several options, including airstrikes, but has not made a final 
      decision, Reuters and CNN both reported early Thursday. 
 
   -- Trump warned Iran that "time is running out" to reach a nuclear deal, 
      adding that a "massive Armada is heading to Iran," in a post on Truth 
      Social Wednesday. 
 
   -- Iran's Islamic Revolution Guards Corps said the country's armed forces 
      were fully prepared and have action plans in place to respond to any 
      attack, Iran's state news agency IRNA reported. 

What's Next: While the hostilities still amount to just threats for now, markets are clearly getting more jittery about the risks of military intervention and, as Trump says, time is running out.

-- Callum Keown

***

Southwest Projects Robust 2026 Profit on New Seat Policies

Southwest Airlines turned heads when it shifted away from decades-old practices and embraced baggage fees and assigned passenger seating, but now it forecasts a big boost for 2026 profit because of those changes. It beat expectations for fourth-quarter results and projects a 300% increase in per-share profit this year.

   -- The carrier reported fourth-quarter adjusted earnings of 58 cents a share 
      and record revenue of $7.4 billion. Its full-year profit was 93 cents a 
      share on a record $28.1 billion in revenue. Adjusted earnings for the 
      first quarter, which includes disruptions from the weekend's monster 
      storm, are expected to be at least 45 cents a share. 
 
   -- Last year, Southwest initiated the "most ambitious transformation" in 
      company history including new bag fees, basic economy fares, assigned 
      seating and premium accommodations like extra-legroom seating. Southwest 
      also exceeded its cost-cutting goals, including its first-ever layoffs, 
      and returned $2.9 billion to shareholders. 
 
   -- Assigned seating began this week, ending more than 50 years of open 
      seating in a bid to reap the revenue other carriers have long collected 
      for seat selection and other cabin accommodations. But the end of open 
      seating makes Southwest less differentiated. 
 
   -- Southwest reported earnings after Delta Air Lines and United Airlines 
      beat fourth-quarter expectations, while American Airlines' fourth-quarter 
      results fell short, partly because of the federal government shutdown. 
      Delta issued disappointing 2026 guidance, but United and American were 
      both more upbeat in their projections. 

What's Next: Although a measure of profitability called revenue per seat-mile dipped 0.2% in the fourth quarter from a year ago, partly because of Federal Aviation Administration-mandated flight cuts during the shutdown, Southwest expects first-quarter revenue per seat-mile to increase at least 9.5% from a year ago.

-- Janet H. Cho

***

-- Newsletter edited by Liz Moyer, Patrick O'Donnell, Callum Keown

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January 29, 2026 06:50 ET (11:50 GMT)

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