Inflation Test: CPI in Focus 12/08/2026
Market Wrap
US stocks extended their decline on Tuesday as weakness in major technology shares and renewed uncertainty over the Strait of Hormuz weighed on risk appetite. The S&P 500 fell 0.3% to 7,728.20, marking a second straight loss, while the Nasdaq Composite dropped 0.6% to 26,445.45. The Dow Jones Industrial Average shed 184 points, or 0.3%, to close at 53,791.85.
Communication services led the retreat, falling more than 2% as Alphabet (GOOGL) slid 3.8% and AppLovin (APP) lost nearly 6%. Alphabet recorded its fourth decline in five sessions following Google's announcement of a restructuring of its artificial-intelligence operations. Technology also came under pressure, with Apple (AAPL) falling more than 1%, while Nvidia (NVDA) erased an early gain despite unveiling a partnership with six major financial firms aimed at mobilizing more than $500 billion for AI infrastructure.
Oil prices climbed as optimism over a potential reopening of the Strait of Hormuz faded, reviving concerns over the US-Iran conflict and its impact on global energy supplies. The renewed pressure in crude comes at a sensitive time for markets, with investors already assessing whether higher energy costs could complicate the Federal Reserve's inflation outlook.
Attention now shifts to Wednesday's July CPI report, which is expected to show only a modest acceleration in monthly inflation. Thursday's producer-price data will provide another important test after June's softer reading. Earnings also remain in focus, with Cerebras (CBRS) and Cisco Systems (CSCO) scheduled to report after Wednesday's closing bell.
CPI Puts the Fed in Focus
Wednesday’s US inflation report could play a major role in determining whether the Federal Reserve keeps rates unchanged or resumes tightening later this year.
July CPI is expected to show relatively modest price pressures, with headline inflation forecast to rise 0.1% from June and 3.4% from a year earlier. Core CPI, which excludes food and energy, is expected to increase 0.2% monthly and 2.5% annually. While inflation would remain above the Fed’s 2% target, another subdued monthly reading could give policymakers more time before considering another rate increase.
The report carries extra weight following July’s unexpectedly weak employment data, which showed payrolls falling by 23,000. At the same time, Fed officials remain divided over inflation risks. The FOMC voted 9-3 to hold rates at 3.5%-3.75% in July, with three policymakers favoring a quarter-point hike, while Governor Lisa Cook has since signaled she could support tightening if inflation fails to improve.
Markets currently see roughly even odds of a September hike. A softer CPI reading would strengthen the case for remaining on hold, while an upside surprise could quickly revive expectations for tightening. Some economists, including those at Bank of America, still expect several rate increases if inflation remains persistent.
With both July and August inflation data available before the Fed's September meeting, Wednesday's CPI will be an important first test of whether policymakers can afford to stay patient or need to return to rate hikes.
Stocks on the Move
- Super Micro Computer (SMCI): Shares rallied more than 8% after the data-center infrastructure company beat fourth-quarter estimates and issued a much stronger-than-expected first-quarter outlook. Adjusted earnings are projected at $1.01 to $1.10 per share, while revenue guidance of $14.5 billion to $15.5 billion came in well above Wall Street forecasts.
- CoreWeave (CRWV): Shares jumped 14% after second-quarter revenue climbed 112% from a year earlier to $2.58 billion, slightly ahead of expectations. Adjusted operating margin of 5% also comfortably topped consensus, reinforcing confidence in the AI cloud provider's growth story.
- Lumentum Holdings (LITE): Shares edged lower despite stronger-than-expected fourth-quarter earnings and revenue. The optical and photonics company remains one of this year's major AI beneficiaries, with the stock still up more than 120% year to date despite a recent pullback.
- Cava Group (CAVA): Shares gained nearly 7% after second-quarter earnings and revenue both beat expectations. The Mediterranean fast-casual chain earned 19 cents per share on revenue of $368.4 million, topping Wall Street forecasts.
Watchlist: AAPL, GOOGL, SMCI, CRWV, LITE, CAVA, NBIS, EAT, MU, APP
Key Economic Events Today
Economic Data (EST)
- 08:30 AM — USD Core CPI, CPI
- 10:30 AM — USD Crude Oil Inventories
- 02:00 PM — USD Federal Budget Balance
Earnings
Before Market Open: Nebius Group (NBIS), Amcor plc (AMCR), Trimble Inc (TRMB), Brinker International (EAT)
After Market Close: Cisco Systems (CSCO), Coherent Corp. (COHR), Cerebras Systems (CBRS), Pan American Silver (PAAS)
