S&P 500 Forecast: SPX rises after no surprises from US CPI data

US futures        

Dow futures 0.30%, S&P futures 0.49%  & Nasdaq futures  0.99%

European futures

FTSE 0.31%,  DAX 0.92%

• US stocks rise after in-line CPI data
• CPI eases to 3.4% YoY, and core CPI to 2.5% YoY
• Super Micro Computers and CoreWaeve support the AI trade
• Oil rises for a sixth day amid Middle East supply concerns

U.S. Stocks Set to Open Higher After July CPI Meets Expectations

U.S. stocks are set to open sharply higher after July's consumer inflation figures came in line with expectations, easing some of the pressure on the Federal Reserve to hike rates.

Attention was squarely on the July CPI report for further clues on the outlook for Federal Reserve monetary policy. The data comes after a softer-than-expected July non-farm payroll report on Friday, which saw markets rein in expectations for a Fed rate hike in September.

The CPI report showed that inflation rose 0.1% month-on-month in July, after falling 0.4% in June, bringing annual headline CPI to 3.4%, down from 3.5%.

Core CPI, which strips out more volatile items such as food and fuel, rose 0.2% month-on-month after a flat reading in June and also eased on an annual basis to 2.5% from 2.6%.

All measures were in line with expectations.

The in-line readings give the Federal Reserve more breathing room to leave interest rates unchanged in September, particularly following Friday's weak jobs report.

According to the CME FedWatch tool, the market is now pricing in a 57% probability that the Fed will leave rates unchanged next month, up from 50% yesterday.

However, there is still another inflation report due before the September FOMC meeting, so this view could still change. Unless the next report shows a meaningful pickup in inflation, the Fed should be in a position to leave rates unchanged.

Inflation is not completely out of the woods, particularly given the geopolitical backdrop. Oil prices have risen 7% this week amid the ongoing closure of the Strait of Hormuz. The reopening of the strait has also hit fresh obstacles, with Iran demanding concessions from the U.S. before allowing the key waterway to fully reopen.

Higher oil prices remain a risk to the inflation outlook and could limit how quickly the Fed can move towards easier policy.

Corporate Movers

Super Micro Computer — The data centre infrastructure stock has rallied more than 7.5% after the company issued solid guidance for Q1 earnings and revenue while also beating Q4 estimates. The company now expects adjusted earnings of $1.01 to $1.10 per share, well above estimates of $0.76.

CoreWeave — The AI company has gained more than 18% after Q2 adjusted operating income margin came in at 5%, compared with expectations of 2.7%. Revenue of $2.58 billion marked a 112% increase from the same period last year.

The results are reassuring investors that demand for AI infrastructure remains strong. Other stocks linked to the AI trade also moved higher, including Dell Technologies, Micron Technology and Cisco.

S&P 500 Forecast – Technical Analysis

The S&P 500 recovered from the 7,470 July low, rising above the 50 EMA and the falling trend line resistance. The index is now consolidating above 7,750, with resistance at the fresh record high of 7,790.

Buyers will look to extend gains above 7,790, bringing 7,900 and 8,000 into focus.

On the downside, support is seen at 7,700. A break below here would open the door to 7,620, the June high, before attention turns to 7,550 and the falling trend line support.

FX Markets – Dollar Falls, EUR/USD Rises

The U.S. dollar is falling following data showing that inflation remained contained in July. The data comes after the weaker-than-expected non-farm payroll report on Friday, with the combination of softer jobs and steady inflation reducing the immediate pressure on the Fed to raise rates.

EUR/USD is rising on U.S. dollar weakness, and after German inflation accelerated to 2.8% year-on-year in July from 2.4% in June, as energy inflation jumped to 7.3% from 2.7% in the previous month. Eurozone GDP data is due on Friday.

GBP/USD is also rising amid a weaker U.S. dollar as investors look ahead to tomorrow's UK GDP data. Expectations are for UK GDP to rise 0.4% quarter-on-quarter, down from 0.6%. The data comes after the Bank of England left interest rates unchanged at its July meeting, with markets expecting rates to remain unchanged for now.

Oil Rises for a Sixth Straight Day

Oil prices are rising for a sixth straight day amid ongoing concerns over supply and the situation in the Middle East.

WTI has jumped 7% on reports that there have been no discussions between Iran and the U.S. to extend their ceasefire. Furthermore, the U.S. would have to agree to Iran's conditions for the Strait of Hormuz to reopen.

Separately, ships were attacked in both the Strait of Hormuz and the Bab el-Mandeb Strait on Tuesday, adding to supply concerns.

The EIA reported that it expects significant disruptions to Middle East crude supplies to persist through the end of 2027. It also expects Brent to average $86.80 a barrel and WTI to average $80.88 a barrel in 2026.

Elsewhere, OPEC said on Wednesday that it had lowered its forecast for world oil demand growth this year to 580,000 barrels per day, marking the fourth straight downward revision.