Wall Street no longer believes Kevin Warsh can do what President Trump wants

Good morning. On Fortune’s radar today:

- Markets: Full steam ahead!

- Wall Street simply doesn’t believe Kevin Warsh can deliver a cut.

- AI data center companies are stealing water.

- There is no jet fuel shortage, this CEO says.

- It took 8 years to create Google Sheets. AI cloned it in days.

- Chart: AI is a convenient excuse for CEOs doing layoffs.

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THE MARKETS

Investors are really enjoying the wall of worry

- S&P 500 futures were up 0.21% this morning. The index was up 0.58% yesterday—another record high at 7,444.25.

- In Europe, the Stoxx 600 was up 0.21% in early trading and the U.K.’s FTSE 100 was up 0.14% before lunch.

- Asia: South Korea’s KOSPI was up 1.75%. Japan’s Nikkei 225 was down 0.98%. India’s Nifty 50 was up 1.36%. China’s CSI 300 was down 1.68%.

- Brent crude sank to $106 per barrel this morning.

- Bitcoin slipped to $79.7K.

Traders no longer believe Warsh can do what Trump wants

It’s not if, but when. That’s what Wall Street—and the markets—are saying about Kevin Warsh hiking interest rates.

Until a few weeks ago, and certainly prior to the war with Iran, investors had priced in the U.S. Federal Reserve delivering a schedule of interest rate cuts over the next year. After this week’s inflation reports, all of that is now off the table.

The Consumer Price Index (the main inflation gauge) for April came in at 3.8%, and the Producer Price Index (inflation in wholesale prices) came in at 6%—both above expectations.

The highly reliable Fed Funds Futures market—where speculators bet on future interest rates—shows that traders believe it’s a near-certainty that the Fed will stay on hold until September. After that, dissenting bets tilt toward a rate hike. Prediction market Kalshi has 31% of bettors saying there will be a hike by the end of the year.

On Wednesday, the risk premium on 30-year U.S. bonds rose above 5% for the first time since 2007. Investors think interest will rise in the future, in other words.

Notes from economists at a range of investment platforms reviewed by Fortune show that analysts now think the next move is hold-or-hike. Almost no one thinks new Fed chairman Warsh can implement a cut as his first move. The unanswered question in this scenario will be, how much patience will President Trump display if Warsh can’t deliver?

- Wells Fargo: AI is a ‘euphoric’ bubble and investors should ride it until it pops - Fortune

ONE BIG THING

They’re stealing the water

In the first week of May, two data center developments, one in Arizona and another in Georgia, were caught taking public water without authorization. In both cases, data center developers consumed water they were prohibited from taking in communities experiencing water stress, and in both cases it was the residents who discovered it. When residents complained of low water pressure, they unknowingly tipped off regulators to an escalating conflict over data center water use in areas fraught with depleting water supplies, Fortune’s Catherina Gioino reports.

In 2023, U.S. data centers directly consumed 17.4 billion gallons of water. That is projected to rise to between 38 and 73 billion gallons by 2028, according to the EPA. In Texas alone, a study estimated data centers would use up to 399 billion gallons by 2030—or the equivalent of drawing down Lake Mead, the largest reservoir in the country, by more than 16 feet in a single year.

The fighting is so fierce that Google even funded a city’s lawsuit against a local newspaper that tried to obtain water-usage figures through a public records request, arguing the data was a trade secret.

CRISIS, WHAT CRISIS?

The jet fuel shortage is a myth, this CEO says

There is no jet fuel shortage, according to Greg Raiff, CEO of private jet services company Elevate Jet. The Strait of Hormuz may be closed, locking away more than 20% of the world's supply of jet fuel. But Raiff hasn't seen a lack of jet fuel. "Those stories are largely politically driven by governmental authorities who are trying to pressure an end to the war, and no better way to get people out than tell them that they can't get to their summer holiday," he told Fortune.

"Aviation is up this year in terms of total demand, total hours flown, total volume of arrivals and departures, on a global basis,” he says. According to ESGauge, the analytics firm, 48.8% of S&P 500 companies now allow their CEOs to have private use of the corporate jet, up from just 6% in 2021.

"We are in no risk of running out of jet fuel anytime soon," Raiff said.

So why are commercial airlines cancelling thousands of seats across the globe? Because airlines want to weasel out of