CPI: Will It Decide September Rate Hike? Market Awaits the “Confirmation Hammer” After Soft Jobs Data How to Position U.S. Stock r-Tokens Ahead?

Core View:

Last week, U.S. stocks rallied strongly on the back of soft non-farm payrolls data, and September rate-hike expectations have cooled significantly. However, the Fed’s internal commitment to the inflation target has not loosened. The July CPI data to be released this Wednesday will serve as the final confirmation hammer on whether inflation is truly cooling.

If core CPI month-over-month holds at the 0.2% consensus, tech growth stocks are likely to extend their rebound. If the data comes in stronger than expected, the market will reprice rate-hike risks, and defensive sectors should relatively outperform. Operationally, leave enough room for volatility and avoid extreme bets.

I. Current Market: Employment Softens First, Inflation Still a Bottleneck

Last week, U.S. stocks staged a strong rebound, with both the Dow and S&P 500 hitting multi-week highs and posting weekly gains of 3%–5%. The primary driver was the shockingly weak July non-farm payrolls — only 23,000 jobs added, far below market expectations. This data quickly shifted policy expectations, pushing the probability of a September rate hike down from around 55% to near 44%.

Yet significant divergence remains inside the Federal Reserve on the policy path. Chair Warsh has repeatedly stressed that the 2% inflation target is “absolute” and non-negotiable. Core inflation is still stuck in the 2.5%–2.6% range. Therefore, cooling in the labor market is only the first step — confirmation that inflation is also cooling remains the key to any monetary policy pivot.

II. Key Event This Week: CPI Data at 20:30 Beijing Time Wednesday

At 20:30 Beijing time on Wednesday, the U.S. will release the July Consumer Price Index (CPI). This is the “final confirmation hammer” the market has been waiting for, and its importance is self-evident.

Market consensus expectations are as follows:

• Headline CPI: +0.1% month-over-month, year-over-year falling to 3.4%. Continued weakness in energy prices will keep weighing on the headline number.
• Core CPI (ex-food & energy): +0.2% month-over-month, year-over-year declining to 2.5%.

The real battleground is whether housing costs and services prices show meaningful cooling. If the data deviates from consensus — especially if core CPI surprises — the S&P 500 could see swings of more than ±2% on the day.

III. Three Scenario Analysis: Direct Look at Beneficiaries

Depending on the core CPI month-over-month reading, the market may follow one of these three paths:

IV. Trading Strategy: Watch the 0.2% Line Before Positioning

This CPI print will directly determine how the market prices policy pressure on Warsh. Soft non-farm data has already provided a buffer — if inflation also softens in line, the rally can extend further. If core remains sticky, elevated valuations will face renewed scrutiny.

Do not bet on extremes. Adjust positions only after the data lands. Volatility will be amplified — leaving enough room to respond is more important than pre-committing to a direction.

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Disclaimer: This content is for informational purposes only and does not constitute investment advice. Markets involve risk; invest with caution.