CPI REPORT IS COMING: Do This Before Market Open!
In a Nutshell
Markets are likely to react sharply to tomorrow's CPI release, with a 67% probability of a Fed rate hike priced in. Traders should avoid overleveraging ahead of the report and maintain cash to buy potential dips, especially if CPI comes in as expected or better. The 700 level on major indices remains critical support, while rising Treasury yields near 5% are already pressuring housing and corporate borrowing costs.
These notes were generated by AI and may contain inaccuracies.
The CPI data report will be released tomorrow at 1 hour before markets open, providing insight into whether the Federal Reserve will raise interest rates or continue to pause at their September 16th meeting. According to the Federal Rate Monitor tool, there is currently a 66.7% probability the Federal Reserve will implement a rate hike and a 33.3% probability they will pause.
The CPI report is released at blss.gov/cpi. This is the official website of the US Bureau of Labor Statistics where the report is published. Users should update this page, click on the PDF, and refresh if necessary to access the latest data for August.
The overall CPI expectation is 3.4% versus the current rate of 3.4%, indicating analysts expect no change. For core CPI (all items less food and energy), expectations are for a decline from 2.5% to 2.4%. Overall CPI has been trending down from highs of 4.2%, while core CPI has decreased from highs around 2.9% to the current 2.5%.
The key principle for handling major economic reports is to avoid being overleveraged. While investors should not be scared to remain invested, they should not put themselves in positions they cannot tolerate. Long-term positions in quality companies should be maintained through dollar cost averaging, and investors should keep cash on the sidelines to take advantage of potential dip buying opportunities.
Today's market showed selling pressure with the NASDAQ losing approximately 1%. The market sold off premarket, attempted recovery during the day, and slowly sold off into the close. Oracle reported earnings that beat expectations but barely, while also burning through $5 billion in cash. This was viewed as a significant red flag for a leveraged company. An overbought reversal short trade was executed on Oracle, resulting in a 4% decline and $7,600 profit on a $175K position.
The US 10-year Treasury yield is approaching 5%, which serves as the benchmark for mortgages. As yields approach 5%, 8% mortgages are becoming a reality for homebuyers. This has contributed to a slowdown in the housing market, with US home sellers now outnumbering buyers, creating a buyer's market.
Japan's PPI report came out at 7.6% versus an expectation of 7.4%. Both China and the UK reported higher inflation readings, with some countries announcing rate hikes. This international context is significant because the Federal Reserve has never been so likely to raise rates in this later half of 2026.
If the Federal Reserve raises rates, it will make borrowing more expensive for individuals, businesses, and especially AI companies building infrastructure. Higher borrowing costs mean slimmer margins and potentially negative impacts on corporate earnings.
Markets have been hovering above the 700 level for the past few weeks, with this level acting as strong support. A break below 700 could signal gap down potential, while a CPI report that comes in as expected or better than expected could lead to a relief rally and dip buying opportunities.
The only traders who panic are those who did not prepare and overleveraged themselves when markets moved against them. The approach emphasizes waiting for the CPI report before making directional decisions, avoiding the urge to jump the gun before data is released.
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