Inflation Data and Tariff Uncertainties Loom Over U.S. Stocks

A wave of inflation data is set to confront U.S. stock investors next week as markets battle fresh uncertainties around tariffs and government bond yields. This comes amid equities reaching near record valuations. Despite an uneven start to September, the S&P 500 index hit a record high on Thursday.

Investors anticipate the upcoming U.S. consumer price index report, crucial for insights into potential interest rate cuts and the fallout from tariffs. Recent remarks by Federal Reserve Chair Jerome Powell have fueled expectations of a rate cut at the September 16-17 meeting. Following weak job growth, bets on more aggressive easing increased.

The highest risks this year like tariffs returned to focus after a ruling declared most of Trump's tariffs illegal, adding to market unpredictability. As long-bond yields rose, U.S. stock investors remain cautious, particularly with the S&P 500's valuation rising significantly above its long-term average.