US Stock Rally Faces Inflation Test as Investors Weigh Fed Rate Path

The US stock market's recent technology-led rally is facing its biggest test yet as investors await inflation data, which could influence expectations for the Federal Reserve's interest-rate path. Softer inflation readings may sustain the rally, while hotter-than-expected numbers could revive rate-hike concerns.

The S&P 500 posted a record closing high last week, driven by technology and semiconductor stocks that had previously retreated from their peaks. The benchmark index gained 5.75% over four sessions through Tuesday, its strongest advance since April 2025.

Investors will focus on the US Consumer Price Index report due Wednesday, which is expected to show a 3.4% year-over-year increase in headline CPI and 2.5% rise in core CPI. A hotter-than-expected reading could revive concerns about further monetary tightening and put pressure on stocks.