TLDR

MARKET RECAP → Markets climbed on Thursday, with the S&P 500 (VOO) and Nasdaq Composite (QQQ) scoring record closes, propelled by Alphabet (GOOG) beating earning expectations. During the day 38 stocks in the S&P 500 hit 52-week highs. The Dow Jones Industrial Average fell, dragged down by a drop in IBM (IBM).

NO CUTS FROM FRANKFURT → The European Central Bank held rates at 4.25% and signaled no rush to cut again, citing tariff threats and inflation uncertainty. Lagarde warned against expecting a smooth path to easier policy.

GOLDMAN AND BNY TOKENIZE CASH → Union Pacific (UNP) is exploring a merger with Norfolk Southern (NSC) that could reshape U.S. rail, but regulators may derail it. STB Chair Martin Oberman and Biden-era antitrust forces loom large, though Wall Street is watching closely, with NSC shares surging and UNP dipping on the news.

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Economy

No Cuts From Frankfurt

No rate change, but no promises either: The European Central Bank (ECB) left its benchmark rate at 4.25%, pausing after a June cut. ECB President Christine Lagarde emphasized it’s “not a linear decline” from here, and policymakers want to be sure inflation will sustainably return to 2%. She warned against making assumptions about future cuts.

Tariffs raise red flags: Lagarde highlighted global trade tensions, particularly new U.S. tariffs, as a major concern. While inflation has eased, these tariffs could push prices higher again, making it harder for the ECB to lower rates. The Bank is treading carefully as it weighs those risks against slowing economic growth.

Markets still eye another cut: Despite the ECB’s cautious tone, markets are pricing in one more cut before the end of 2025. Lagarde maintained that any decisions would be data-dependent, but stressed that incoming information must confirm that inflation is truly on track before the ECB acts again.

Markets

Rail Giants on Collision Course

A potential mega-merger is gathering steam: Union Pacific (UNP) is reportedly in early talks to merge with Norfolk Southern (NSC), a move that would consolidate two of the U.S.’s largest freight railroads. While no deal is guaranteed, the combined entity would boast unmatched geographic reach across the western, central, and eastern U.S., but also invite serious antitrust scrutiny.

Regulators may throw on the brakes: A deal of this scale would need Surface Transportation Board (STB) approval, and STB Chair Martin Oberman has already voiced skepticism toward further Class I rail consolidation. The Biden administration's broader antitrust push adds another layer of uncertainty, especially after its DOJ opposed JetBlue’s acquisition of Spirit.

Investors signal cautious optimism: Norfolk Southern shares jumped nearly 12% on the news, while Union Pacific slipped about 2%, a classic merger dance. The rail industry has been under pressure from service disruptions, labor tensions, and operational costs, potentially making consolidation an appealing, if controversial, fix.

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