Key Takeaways
- FOMC minutes reveal a hawkish bias, with several officials favoring a 25-basis-point rate hike in July and many warning that higher rates will be necessary if inflation does not continue to decline.
- US steel and aluminum stocks plummeted following reports that the U.S. and Canada are nearing a deal to halve tariffs from 50% to 25%, easing trade tensions but threatening domestic price premiums.
- Nvidia (NVDA) is reportedly in talks to fund its AI data supplier, Mercor, at a massive $20 billion valuation, signaling continued aggressive investment in the AI supply chain.
- Geopolitical tensions escalated as Israel signaled military action against Turkish entrenchment in Syria, while U.S. naval forces reported active enforcement of the Iran blockade, having redirected 65 vessels to date.
- Spot Gold prices remained resilient, trading up 3.5% at $4,489.41/oz despite the hawkish Fed tone, as investors weighed inflation risks and global instability.
Fed Minutes Signal Potential for Future Hikes
The minutes from the Federal Open Market Committee (FOMC) July 28-29 meeting revealed a more aggressive stance than the initial "hold" decision suggested. While most officials supported steady rates, several participants favored an immediate 25-bps increase, arguing that financial conditions might not be restrictive enough to return inflation to the 2% target.
Participants highlighted that inflation risks remain skewed to the upside, citing factors such as a protracted Middle East war and the broader effects of AI investment on prices. Chairman Kevin Warsh also initiated discussions on reducing the number of policy meetings to six per year to allow for more data accumulation, though no changes were made to the 2026 schedule.
US-Canada Tariff Deal Hits Domestic Steel Producers
Shares of major U.S. metals firms saw a sharp sell-off Wednesday following news that the U.S. may cut tariffs on Canadian steel and aluminum from 50% to 25%. The move, intended to reduce cost pressures for U.S. manufacturers, triggered concerns over increased competition for domestic producers.
Nucor (NUE) and Steel Dynamics (STLD) both dropped 6.2%, while Century Aluminum (CENX) fell 8.5%. Cleveland-Cliffs (CLF) also saw a decline of 2.5% as investors reacted to the potential easing of North American supply chain costs.
Nvidia Eyes $20 Billion Mercor Deal
In the technology sector, Nvidia (NVDA) is reportedly discussing a significant funding round for Mercor, an AI data supplier. The deal would value Mercor at $20 billion, highlighting the premium Nvidia is willing to pay to secure the data infrastructure necessary for its dominant AI chips.
This move comes as the Fed minutes noted that AI-related capital expenditures are beginning to have a "broader effect" on price levels across the economy. Despite the hawkish monetary outlook, Nvidia's aggressive expansion suggests that the tech giant sees no immediate slowdown in AI demand.
Geopolitical Friction and Energy Stability
Geopolitical risks remain at the forefront as Israeli Prime Minister Netanyahu warned that Israel will not tolerate Turkish military entrenchment moving south in Syria. Simultaneously, the U.S. Navy confirmed it has disabled three vessels and boarded two others while enforcing a blockade against Iran, illustrating the high stakes in regional waters.
In Europe, EU Energy Commissioner Jorgensen described the current electricity supply as "stable" but cautioned that the situation is expected to "remain tight" in the coming weeks. This energy uncertainty, combined with the Fed's warning of upside inflation risks, continues to support Gold's record-breaking rally toward the $4,500 mark.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.