Inflation report next week to test record stock rally, Fed rate outlook

A technology-driven rally that pushed U.S. stocks to record highs faces a test next week from a Consumer Price Index report due Wednesday. The S&P 500 notched its first all-time closing high in two months this week, gaining 5.75% over a four-session stretch through Tuesday, its biggest four-day surge since April 2025.

Economists polled by Reuters expect the July CPI to show a 3.4% annual increase, with core inflation excluding food and energy up 2.5%. The data follows a Federal Reserve meeting last month at which the central bank held interest rates steady but saw three of 12 policymakers dissent in favor of a hike.

Markets were pricing in a 44% chance of a rate increase at the Fed's September meeting as of Friday, with those odds falling after a report showed the U.S. economy unexpectedly lost jobs in July. The benchmark 10-year Treasury yield has pulled back to 4.64% from a high hit in late July, while U.S. crude has dropped below $80 a barrel, easing some inflation worries tied to earlier U.S.-Iran tensions.

A separate producer price report is due the day after CPI, and retail sales data on Friday will offer a further read on consumer spending. Semiconductor and technology shares, which have led this year's rally, remain sensitive to upcoming earnings from companies including Applied Materials, Cisco and CoreWeave.

Read the full story at galvnews.com.