Today’s CPI report could decide whether Friday’s big market move had it right. Last week’s surprisingly weak jobs report changed the Fed conversation pretty quickly. The U.S. lost 23,000 jobs in July, Treasury yields fell, stocks rallied and traders reduced their expectations for another rate hike. Now we get the other half of the picture: inflation. At 8:30 AM ET today, the U.S. releases its CPI data for July, with economists expecting headline inflation around 3.4% year over year and core inflation around 2.5%. A cooler-than-expected number would fit nicely with what the market has already started pricing in, a hot number would make things much more complicated. The Fed could find itself looking at a slowing labor market while inflation remains stubbornly high, meaning raising rates risks putting even more pressure on employment, while leaving rates unchanged risks allowing inflation to stick around. That’s why today’s number matters beyond whether CPI comes in at 3.3%, 3.4% or 3.5%. We’re starting to get a clearer picture of the two things the Fed cares about most: Inflation and employment. Jobs already surprised us. Now we find out what inflation has to say. 🍿

BANKS RAISE CORE PCE FORECASTS AFTER CPI Wall Street economists have raised their August core PCE estimates following the latest CPI data, with forecasts now clustering in the high 0.20% range and several banks seeing 0.30% or higher. *Barclays: 0.25% | Pre-CPI: 0.22% | Pre-PPI: 0.23% *Goldman Sachs: 0.26% | Pre-CPI: 0.24% | Pre-PPI: 0.22% *Nomura: 0.278% | Pre-CPI: 0.245% | Pre-PPI: 0.205% *BofA: 0.30% | Pre-CPI: 0.26% | Pre-PPI: 0.24% *TD: 0.32% | Pre-CPI: 0.24% | Pre-PPI: 0.18% *Mizuho: 0.30% old methodology / 0.40% new methodology

What a reaction to the US CPI data just now. Stocks and gold were crushed at 8:30 AM ET only to entirely erase their decline and turn positive 20 minutes later. The 10Y Note Yield surged to a high of 4.99% before reversing and is now RED on the day. This is a nervous market.

US stocks hovered near records ahead of July CPI data, with Fed rate-hike odds easing after weak payrolls. Oil rose on unresolved Strait of Hormuz tensions as Trump favored economic pressure on Iran over strikes. Long duration equities advanced, TSMC posted strong sales, and S&P FY’2026 EPS estimates continued to rise (now +30% YoY to $361, P/E 21.4x) on higher AI investment, though overall valuations offer no equity risk premium versus 10-year treasuries. We remain cautious on $TSLA amid declining long-term earnings estimates, increasing autonomous-vehicle competition, and TSLA’s extended valuation.