Investors Await Key US Inflation Report Amid Split Fed Hike Odds

Global markets are focused on the release of the U.S. Consumer Price Index (CPI) for July, a critical data point that could significantly influence the Federal Reserve's next interest rate decision. According to Reuters, futures markets are currently pricing in a 50-50 probability of a rate hike at the central bank's September meeting, highlighting the report's importance for investor sentiment.

Inflation Picture in Focus

Economists expect both headline and core annual inflation rates to show a slight moderation in today's report. A softer reading would align with last week's cooling jobs numbers and could temper speculation of another Fed rate hike. The CPI is the first of three key inflation gauges this month, with the Producer Price Index (PPI) due tomorrow and the Fed's preferred Personal Consumption Expenditures (PCE) price index scheduled for release later.

Bond markets showed signs of stabilization ahead of the data, with a 3-year Treasury auction on Tuesday meeting with decent demand. A 10-year Treasury note auction is scheduled for later today. However, rising energy costs present a potential headwind, with Brent crude futures trading near $90 per barrel amid an impasse in Iran talks and attacks in the Red Sea. These higher oil prices will not be reflected in the July CPI data but remain a concern for future inflation.

Tech Sector Shines with Strong Results

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Amid the broader market caution, several technology companies delivered strong financial results, buoying investor confidence. Key highlights include:

• CoreWeave: The AI-focused cloud company's stock surged 15% in overnight trading after it beat second-quarter revenue forecasts and upgraded its demand outlook, citing a backlog of over $100 billion in orders.
• Super Micro Computer: Shares jumped 7% after the server technology firm's sales forecast also surpassed analyst estimates.
• Foxconn: The world's largest contract electronics manufacturer, based in Taiwan, reported a 35% increase in second-quarter profit, also beating expectations.

These results underscore the ongoing boom in demand related to artificial intelligence. Reflecting the strong performance in global equities, Norway's $2.3 trillion sovereign wealth fund, the world's largest, posted a record profit of $184.3 billion for the first half of the year, according to Reuters.