Gross fixed capital formation declined 0.4% month-over-month in May 2026, following the 4.1% increase recorded in April, reflecting a moderation in fixed investment in the short term. In contrast, the indicator rose 2.4% year-over-year. By component, the monthly decline was primarily driven by a 2.4% decrease in construction investment, due to a 7.9% drop in residential construction, while investment in machinery and equipment increased 1.5%.

Our Take

The monthly decline in fixed investment suggests a loss of momentum at the end of the second quarter, driven mainly by weakness in the construction sector. Nevertheless, annual growth and the increase in machinery and equipment investment indicate that some elements of strength remain in productive investment. Going forward, it will be important to assess whether May's decline reflects a temporary adjustment following April's strong rebound or signals a more persistent slowdown in investment.

The U.S. labor market showed signs of moderation in July after private job creation came in below expectations, pointing to a gradual slowdown in hiring following several months of solid expansion. According to ADP, private sector employment increased by 44,000 jobs during the month, below the revised gain of 95,000 in June and the market expectation of 65,000 jobs.

Our Take

While a single reading does not alter the overall labor market trend, the data reinforces the perception of a gradual normalization in employment conditions as investors continue to assess the implications for the Federal Reserve's monetary policy path.

The Eurozone services sector returned to growth, joining the manufacturing sector in expansion territory. The S&P Global Services PMI Business Activity Index rose from 49.4 points in June to 51.7 in July. This rebound ended a three-month period of contraction and marked the fastest pace of growth since February. Stronger demand was the main factor behind the renewed expansion in business activity.

Our Take

The final reading reinforces the perception of a Eurozone economy that is proving more resilient than expected amid the ongoing conflict in the Middle East. July marked the first significant expansion in services activity since the start of the war, complementing the recovery in the manufacturing sector, which reported its strongest production growth in more than four years.

According to Axios, the United States, Iran, and Oman are preparing to announce, either today or tomorrow, a temporary 60-day agreement to regulate navigation through the Strait of Hormuz. Under the proposal, incoming vessels would use a northern shipping lane close to Iran, while outbound traffic would sail through Omani waters in coordination with the Islamic Republic. No tolls or transit fees would be charged during the agreement's duration. In addition, Iran and Oman would cooperate in clearing mines from a central shipping lane to restore two-way maritime traffic.

Our Take

The framework of the agreement currently under negotiation includes elements that warrant caution. The separate shipping lane structure, the absence of a unified oversight mechanism, and Iran's continued central role in coordination essentially reproduce the same structural ambiguity as the original memorandum of understanding, a design that largely explained the escalation seen throughout July.

Corporate News

SpaceX shares fell more than 11% in pre-market trading after the company reported quarterly results that exceeded market expectations across nearly every metric but raised investor concerns over the sharp increase in artificial intelligence investment. Between April and June, capital expenditures totaled $18.369 billion, significantly above the little more than $13.2 billion expected by analysts. Approximately 80% of that amount was allocated to AI-related initiatives, intensifying market concerns about the expected profitability and payback period of those investments.

AMD is down sharply (-8%) in pre-market trading despite reporting record results that generally exceeded consensus expectations. The company posted nearly 50% year-over-year revenue growth, supported by strong performance in its data center business and third quarter guidance that came in slightly above market expectations. However, the high standards currently applied to companies linked to artificial intelligence have significantly raised the bar for positive surprises.

Walt Disney reported adjusted earnings per share of $2.06, above the estimated $1.86, with operating income of $5.56 billion compared with the expected $5.24 billion. The entertainment division reported 64% profit growth, while the Experiences segment, which includes theme parks and cruise operations, grew 20% to $3.02 billion. The company confirmed the sale of its 50% stake in A+E Global Media to Hearst for $1.2 billion and increased its share repurchase program to $9 billion for the fiscal year.

Eli Lilly raised its full-year revenue guidance, sending its shares up 5.8% during the session as investors evaluated the performance of its new weight-loss pill, Foundayo, approved in April. The medium-term focus remains on the company's ability to expand the obesity treatment market and strengthen its competitive position against the growing number of oral therapies, including Novo Nordisk's Wegovy pill.

The To-do List

  • Follow the potential announcement of the temporary U.S.-Iran-Oman agreement regarding the Strait of Hormuz.

  • Keep an eye on the impact of July's ADP private employment report on expectations for the Fed's next policy moves.

  • Tonight, make red chicken enchiladas with cheese, a midweek classic that never disappoints and can be prepared in less than 30 minutes.

  • Dedicate half an hour to a circuit of burpees and squats, no equipment, no excuses, and doable anywhere at home.

Today's Quote...

"Every day is a new opportunity to change your life."

— Anonymous