Goldilocks Gets a Second Wind

Wednesday delivered the number the bulls had been waiting on since Friday. July's consumer price index rose just 0.1% on the month and 3.4% over the year, with core at 0.2% and 2.5% — both a shade cooler than June and squarely in line with forecasts. Paired with last week's soft jobs report, it is the closest thing this market has had to a green light in months. The S&P 500 added 0.3% to 7,748.50, its first gain since setting a record last Friday.

The internal read is what makes this a momentum story. The Nasdaq climbed 0.5% and the Dow finished essentially flat — leadership handed straight back to technology. Nvidia, Super Micro Computer and CoreWeave led on fresh signals that corporate AI spending isn't slowing, and Treasury yields eased after the print. This is the mirror image of last week's rotation into cyclicals: cool inflation lowers the discount rate on long-duration growth, and nothing is more long-duration than the AI complex.

The Fed math just moved

The report did real work on rate expectations. Futures now price roughly a 60% chance the Fed holds its benchmark rate steady next month, up from about 52% a day earlier. That is the market unwinding hike fear in real time. The caveat came from the top: as one strategist put it, this is a helpful report rather than an all-clear, and Warsh has been adamant that inflation — still well above the 2% target — remains his focus.

Cool inflation is rocket fuel for long-duration growth. The AI names didn't just participate today — they led.Momentum Check

Momentum read

For now, the tape rewards the same trade that has defined 2026: AI infrastructure and the companies feeding it. But a market leaning this hard on a single theme is only as steady as the data underneath it. Friday brings retail sales and consumer sentiment — the first look at whether the soft labor market is starting to reach the checkout line.