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After dropping on Friday, the benchmark S&P 500 ended the week with a slim gain and was about 1% shy of its mid-August record high. Equities were jostled by changes in rate-path expectations and concerns that rising U.S. Treasury yields could trip up Wall Street's rally. Markets have been consumed in recent weeks by the prospects of a rate increase at the Fed's next meeting on September 15 to 16. Such bets ramped up after a speech late last month from Fed Chairman Kevin Warsh that signaled the central bank might have to act if inflation remains high, and the case for a hike built on Friday after a strong labor market report. But the potential for such a rate move remained up in the air. That uncertainty left investors bracing for volatility tied to the monthly Consumer Price Index report, due on September 11. The report is Wall Street's most closely watched inflation gauge. Fed officials "have spent recent months underscoring their commitment to price stability, and at some point, that rhetoric will need to be backed by action if inflation fails to show sufficient progress," said Sid Vaidya, chief investment strategist at TD Wealth. "CPI will certainly move the needle one way or the other ... so there is a lot riding on this report." The S&P 500 has gained nearly 13% in 2026, underpinned by an exceptionally strong year for corporate profits. But investors have braced for a potential pullback in September, which historically is the weakest month of the year for U.S. stocks. With the second-quarter reporting season ending, investors are wary of other factors clouding the outlook for equities such as bond market anxiety or newly inflamed Middle East tensions. PPI, CPI TO FLESH OUT INFLATION PICTURE Data on producer prices will give investors an initial glimpse at August's inflation trends during the holiday-shortened week, with U.S. markets closed on Monday for Labor Day. Thursday's Producer Price Index report comes a day ahead of the CPI data. Economists polled by Reuters expect a 0.4% monthly rise in August CPI, and a 0.2% rise in the core measure, which excludes the volatile food and energy components. Inflation has for several years run consistently above the Fed's 2% annual target. But the prior month's CPI reading showed prices barely increased. With the upcoming CPI, "what really matters is whether that print really confirms the cooling that we saw in June and July," said Garrett Melson, portfolio strategist with Natixis Investment Managers Solutions. "It does kind of come down to one print, in that sense." HIKE ODDS AROUND A COIN FLIP Indeed, odds of an interest-rate hike fell on Thursday, following comments from Fed Governor Christopher Waller that he is inclined to argue in favor of keeping interest rates steady if upcoming data confirms inflation pressures are cooling. They rose again on Friday after data showed August employment grew by 162,000 jobs, nearly triple the forecast. Late on Friday, fed funds futures suggested a 57% chance the central bank would hike at its next meeting. Barclays economists said in a note that the employment report "marginally" strengthens the case for a quarter-percentage-point hike at the September meeting, adding: "Attention now shifts to next week's inflation data." The prospect of tighter monetary policy could undercut stock performance in several ways, including by raising borrowing costs that slow the economy. Rate hikes that translate into higher Treasury yields could create more investment competition from bonds and pressure equity valuations. The benchmark 10-year Treasury yield edged up to 4.78% late on Friday, moving toward the 5% yield investors have flagged as a troublesome level for equities. Next week, the Treasury Department is scheduled to start its larger program of buybacks of longer-dated debt, which it announced last month and which has been seen as an effort to tamp down rising Treasury yields. Quarterly results from Oracle on Thursday could have implications for the market's AI trade. Oracle is one of the hyperscalers spending heavily to build AI data centers. Some of the highest-flying stocks in the AI trade, including semiconductors, have cooled off in recent weeks, but other groups have helped support the S&P 500. "This is an equity market that is still working through the rubble from that momentum unwind in July and searching for new leadership and searching for a new narrative to drive the next move," said Natixis' Melson. 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