A sharp technology-led rally that has lifted the U.S. stock market to record peaks will be tested next week by fresh inflation data, which could build the case for the Federal Reserve to raise interest rates. The S&P 500 .SPX .SPX 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 peaks. Over a four-session stretch ending on Tuesday, the benchmark index gained 5.75%, its biggest four-day surge since April 2025.
Calming of U.S.-Iran tensions also buoyed stocks, with a pullback in oil prices alleviating some worries about inflation, ahead of the closely watched U.S. consumer price index report due on Wednesday.
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 consecutive quarter, underpinning investor optimism about the backdrop for equities.
The July CPI report comes on the heels of a Fed meeting that revealed divisions about how the central bank should handle inflation that has run above its 2% annual target for several years. Economists expect CPI to rise 3.4% on a year-over-year basis, according to a Reuters poll as of Thursday. A 2.5% annual rise is projected for core CPI, which excludes the volatile food and energy components.
The Fed held interest rates steady at its meeting last month, but three of 12 policymakers dissented in favor of a hike. Markets as of Thursday were pricing in a nearly 60% chance of a rate increase at the Fed’s next meeting in September. Concerns about persistently high inflation and Fed rate hikes have contributed to a rise in Treasury yields, which investors cite as a major risk to the rally in stocks.
Higher Treasury yields can make bond investments more competitive with equities. Higher yields also translate into higher borrowing costs for consumers and companies, dragging on economic growth and stocks. The benchmark 10-year Treasury yield US10YT=RR in late July hit its highest level since January 2025. But the yield has since pulled back to 4.67%, with U.S. crude dropping below $80 a barrel this week. The monthly report on producer prices, due a day after CPI, will also flesh out the inflation picture. Retail sales data on Friday offers a view into consumer spending, which is a key gauge for the strength of the broader economy.
After a flood of quarterly reports the past few weeks, the earnings calendar hits a relative lull. But the high-flying AI and tech trade still could be sensitive to reports next week, including from semiconductor company Applied Materials AMAT.O AMAT.O , networking equipment maker Cisco CSCO.O CSCO.O and cloud infrastructure technology company CoreWeave CRWV.O CRWV.O .
Semiconductor shares in particular have driven the stock market’s rally this year, with the companies expected to benefit from massive spending on AI data centers. The Philadelphia SE Semiconductor index .SOX .SOX is up 70% in 2026, but the SOX index remains down more than 17% from its late-June high and is seeing huge swings on a daily basis.
On Friday, the DOW closed up 151, the NASDAQ finished 342 points higher and the S&P 500 climbed 47 points to end at 7757.
Reporting by Lewis Krauskopf, editing by Colin Barr and Aurora Ellis.
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