US Markets:

Market Takeaway: Although the main indices fell, smaller companies held up well and more S&P 500 stocks rose than fell. This suggests the weakness was concentrated in a few larger companies rather than being a broad market sell-off.

Key Markets:

Gold: $4,400 per ounce
Gold continues to benefit from geopolitical uncertainty and investor demand for safe-haven assets ahead of today’s inflation report.

Oil: $89 per barrel
Oil remains one of the biggest market drivers, with Brent approaching the key $90 level as uncertainty around the Strait of Hormuz continues.

Bitcoin: $63,660
Bitcoin has moved lower while gold has strengthened, showing investors are currently favouring traditional defensive assets during the recent rise in geopolitical uncertainty.

Dollar: The dollar remains relatively stable as investors balance weaker US employment data against ongoing inflation concerns and expectations for Federal Reserve policy.

Brent crude climbed again on Tuesday and is now trading around $89 per barrel as uncertainty around shipping through the Strait of Hormuz continues.

The strait is one of the world’s most important oil routes, so any disruption can quickly affect global supply and prices.

For investors, the concern is inflation. Higher oil feeds into fuel, transport and business costs, which can make it harder for inflation to continue falling. If that happens, the Federal Reserve has more reason to keep interest rates high or potentially raise them again.

Alphabet (Google) fell around 3.8%, Amazon lost 2.1% and SpaceX declined close to 4%.

This continues a theme we have seen throughout earnings season. Investors still believe strongly in AI, but they are becoming more selective about which companies deserve high valuations.

With the largest technology companies carrying so much weight in the S&P 500 and Nasdaq, weakness in a handful of names was enough to pull both indices lower even though the wider market held up reasonably well.

Apollo rallied after being linked to Nvidia’s plans to raise huge amounts of outside capital to help finance AI infrastructure.

The move highlights a new part of the AI boom. Building data centres and computing infrastructure requires enormous amounts of money, creating opportunities for companies that provide the financing.

Blackstone rose for the same reason, with investors increasingly viewing large alternative investment firms as another way to benefit from AI infrastructure spending.

Jabil gained following an analyst upgrade, supported by continued optimism around demand for the hardware needed to build AI infrastructure.

Losers -

The sportswear company plunged after disappointing sales.

Alphabet was one of the biggest drags on the S&P 500 as investors continued reassessing the valuations and spending plans of the largest technology companies.

The takeaway:
Investors continue to favour companies connected to the AI infrastructure buildout, but are becoming more selective.

Today’s July CPI inflation report is the key market event, released before the US market opens.

Economists expect:

The report matters because it will influence expectations around the Federal Reserve’s next interest-rate decision.

If inflation is cooler than expected:
Markets may view this as confirmation that price pressures are easing, reducing the chance of another rate increase and supporting stocks, especially technology companies.

If inflation is hotter than expected:
Investors may worry that the Fed needs to keep rates higher for longer, which could push bond yields higher and pressure growth stocks (because interest payments stay higher).

One thing to watch: oil prices have risen sharply recently, but much of that increase will not yet appear in today’s data. This means markets will also be watching whether higher energy costs create future inflation pressure.