U.S. inflation data to test record-setting stocks

The S&P 500 this week posted its first all-time closing high in two months, propelled by tech and semiconductor shares that ‌had stumbled in between the record highs

A sharp technology-led rally that has lifted the U.S. stock market to record highs will be tested next week by latest inflation data, which could build the case for the ​central bank to raise interest rates.

The S&P 500 this week posted its first all-time closing high in two months, propelled by tech and semiconductor shares that ‌had stumbled in between the record highs. Over a four-session stretch ending on Tuesday, the benchmark index added 5.75%, its biggest four-day surge since April 2025.

Calming of U.S.-Iran tensions also buoyed stocks, with a retreat in oil prices alleviating some worries about inflation, ahead of the closely watched U.S. consumer price index report due on Wednesday.

The market has inflation anxiety, said Matthew Miskin, co-chief investment strategist at Manulife John Hancock Investments. We will see next ​week if the inflation data gives the market a sigh of relief.

The recent market upturn has pushed the S&P 500’s year-to-date gain to more than 12% as of ​Thursday. Corporate profit reports are surpassing lofty expectations for a second straight quarter, underpinning investor optimism about the backdrop for equities.

We’ve had some strong ⁠earnings, particularly from some of the bigger companies that needed to report good numbers, said Matt Orton, chief market strategist at Raymond James Investment Management.

At the same time, a big part of ​the July sell-off was that positioning became way too crowded and expectations were too exuberant, Orton said. And so you saw that get worked off during the month.

The July CPI report ​comes on the heels of a central bank meeting that revealed divisions about how the bank should handle inflation that has run above its 2% annual target for several years.

CPI coming down the last couple of months may be enough ​to prevent the Fed from hiking rates this year, said Dominic Pappalardo, chief multi-asset strategist for Morningstar Wealth. Should CPI snap back higher and come in above forecast on Wednesday, then I ​would expect stocks to sell off on that news.