Inflation Takes Center Stage Ahead of Crucial CPI Report

Wall Street closed the week at record highs despite investors still worrying about the Federal Reserve's next move. The market has shifted its focus from payrolls to inflation, and this week's consumer price index (CPI) report will be a crucial test.

The weak July payroll report reduced the urgency for a September rate hike, and Treasury yields backed off in response. This created a more comfortable macro backdrop, with softer oil prices adding to the positive sentiment.

However, inflation remains the Fed's biggest concern, and Wednesday's CPI report will be closely watched. A benign print would allow the market to maintain its current playbook, but a hotter print could lead to increased pressure on Treasury yields and potentially put technology stocks at risk.