Iran launched ballistic missiles at U.S. forces overnight, ending a three-day drop in oil. The Fed announces its decision today. Microsoft and Meta report after the close. Bitcoin slipped toward $63,500 after the Senate delayed the CLARITY Act.
The market entered today expecting one catalyst.
It woke up with three.
Iran launched ballistic missiles at U.S. forces overnight, ending three days of calm and pushing oil sharply higher. U.S. equity futures weakened as investors returned to inflation and supply concerns.
S&P 500 futures fell 0.12%. Nasdaq 100 futures lost 0.49%. Dow futures dropped about 60 points.
Asia also turned lower.
South Korea's KOSPI fell more than 8%, led by Samsung Electronics and SK Hynix, triggering its second market-wide trading halt this week.
Tuesday looked very different.
The Dow gained 537 points and the S&P 500 rose 0.21%, while the Nasdaq slipped 0.22% as semiconductor stocks continued to weaken even with lower oil prices.
Today shifts the focus again.
The Fed announces its decision at 2 p.m. ET.
Microsoft (MSFT) reports fiscal fourth-quarter results after the close. Wall Street expects EPS of about $4.23 on revenue between $87.5 billion and $87.7 billion.
Meta also reports, with consensus EPS near $7.21.
The broader question remains unchanged.
The four largest hyperscalers are expected to spend about $725 billion on capital expenditures in 2026, up roughly 77% from about $410 billion in 2025.
Investors now care less about revenue growth and more about whether AI spending is producing returns.
The Signal
Iran changed the morning. The Fed shapes the afternoon. Microsoft and Meta decide how investors judge the AI trade tonight.
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Oil reversed quickly.
Brent settled Tuesday at $84.09.
Overnight, it rebounded toward $87 after Iran launched missiles at U.S. forces.
WTI climbed back near $82.
The rebound erased much of the optimism created by recent diplomacy.
Iran and Oman continue discussing the future of the Strait of Hormuz, including a proposal that would allow ships to pay voluntary transit fees instead of mandatory tolls.
The proposal remains only a framework.
The pattern has become familiar.
Diplomacy lowers prices.
Military action brings the risk premium back.
Brent has moved more than 15% in either direction three different times during the past six weeks.
That volatility continues feeding inflation concerns just hours before the Fed decision.
Energy Signal
Oil spent three days pricing diplomacy. One overnight attack reminded markets how quickly that premium can return.
The Fed announces its decision at 2 p.m. ET, followed by Chair Kevin Warsh's press conference.
Markets still expect rates to remain unchanged at 3.50% to 3.75%, making this the fifth straight meeting without a move.
The statement matters.
Warsh's comments matter more.
Markets assign roughly a 36% chance of a hike today, while September remains the meeting investors continue to price as the bigger risk.
Warsh enters the meeting with mixed signals.
Oil has risen again.
The labor market remains resilient.
Inflation has improved but remains above target.
The White House continues calling for lower rates.
Markets will listen for any change in language on inflation, growth, or September.
Macro Signal
The decision is expected. The press conference will determine how markets price September.
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The semiconductor selloff continues.
Samsung Electronics lost 13.4% Tuesday.
SK Hynix fell 14.7%, helping push the KOSPI down 10.8%.
The pressure began after Chinese memory producer CXMT raised $8.6 billion and surged 466% in its Shanghai debut, raising fears that China is accelerating its push into advanced memory chips.
SK Hynix reports earnings today.
Analysts expect record revenue of 84.1 trillion won and operating profit of 64.1 trillion won.
Tonight the focus moves to Microsoft and Meta.
Alphabet (GOOGL) already showed the market's new standard.
Google Cloud grew 82%.
Revenue reached $119.8 billion.
The stock still fell after management lifted capital spending to as much as $205 billion and free cash flow turned negative.
Microsoft now needs to prove Azure growth can justify rising investment.
Meta must show that its AI spending is driving advertising revenue and improving returns.
The market is no longer rewarding spending alone.
It wants proof.
Capital Signal
The next phase of the AI trade depends on evidence that higher capital spending is creating higher profits.
Crypto lost two supports at once.
Bitcoin traded near $63,500 after falling about 2% overnight.
More than $670 million was liquidated across crypto markets during the past 24 hours.
About $533 million came from bullish long positions.
The Senate also delayed the CLARITY Act, reducing the chances of passage before the August recess.
Prediction markets now place the odds of passage around 33% to 37%.
ETF demand has been improving.
Spot Bitcoin and Ethereum ETFs attracted about $137.7 million between July 20 and July 24, marking a third straight week of inflows.
Strategy (MSTR) still holds 843,775 Bitcoin and about $3.75 billion in cash after recent equity sales.
The company reports earnings tomorrow.
Investors will watch closely for any signal that Bitcoin purchases could resume.
The Verdict
Bitcoin remains above $63,000, but regulation, ETF flows, and today's Fed decision now matter more than technical levels.
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Wednesday brings the biggest test of the summer.
Iran reminded markets that geopolitical risk has not disappeared.
The Fed now decides whether recent inflation progress is enough to justify another hold.
Hours later, Microsoft and Meta must answer the question Alphabet could not.
Can hundreds of billions of dollars in AI spending produce returns that match the cost?
Tomorrow brings Apple and Amazon.
By the end of the week, investors should know whether the AI spending cycle is entering its next phase or whether last week's repricing has become the market's new standard.
