A sharp technology-led rally that has lifted the U.S. stock market to record peaks will be tested next week by fresh inflation data, which could build the case for the Federal Reserve to raise interest rates.The S&P 500 this week posted its first all-time closing high in two months, propelled by tech and semiconductor shares that had stumbled in between the record peaks. Over a four-session stretch ending on Tuesday, the benchmark index gained 5.75%, its biggest four-day surge since April 2025.Calming of U.S.-Iran tensions also buoyed stocks, with a pullback in oil prices alleviating some worries ‌about inflation, ahead of the ⁠closely watched ⁠U.S. consumer price index report due on Wednesday."The market has inflation anxiety," said Matthew Miskin, co-chief investment strategist at Manulife John Hancock Investments. "We will see next week if the inflation data gives the market a sigh of relief."The recent ​market upturn has pushed the S&P 500's year-to-date gain to more than 12% as of Thursday. Corporate profit reports are surpassing lofty expectations for a second consecutive quarter, underpinning investor optimism about the backdrop ​for equities."We've had some strong earnings, particularly from some of the bigger companies that needed to report good numbers," said Matt Orton, chief market strategist at Raymond James Investment Management.At the same time, "a big part of the (July) sell-off was that positioning became way too crowded and expectations were too exuberant," Orton said. "And so you saw that get worked off during the ​month."CPI REPORT ON WEDNESDAYThe July CPI report comes on the heels of a Fed meeting that revealed divisions about ⁠how the ‌central bank should handle inflation that has run above its 2% annual target for several years.Economists expect CPI to rise 3.4% on a year-over-year basis, ​according to a Reuters poll ​as of Thursday. A 2.5% annual rise is projected for core CPI, which excludes the volatile food and energy components."CPI coming down ⁠the last couple of months may be enough to prevent the Fed from hiking rates this year," said ​Dominic Pappalardo, chief multi-asset strategist for Morningstar Wealth. "Should CPI snap back higher and come in above forecast on Wednesday, then ​I would expect stocks to sell off on that news."The Fed held interest rates steady at its meeting last month, but three of 12 policymakers dissented in favor of a hike. Markets as of Thursday were pricing in a nearly 60% chance of a rate increase at the Fed's next meeting in September.INVESTORS EYE YIELDS, OIL PRICE VOLATILITYConcerns about persistently high inflation and Fed rate hikes have contributed to a rise in Treasury yields, which investors cite as a major risk to the rally in stocks.Higher Treasury yields can make bond investments more competitive with equities. Higher yields also translate into higher borrowing costs for consumers and companies, dragging on economic growth and stocks.The benchmark 10-year Treasury yield in late July ‌hit its highest level since January 2025. But the yield has since pulled back to 4.67%, with U.S. crude dropping below $80 a barrel this week."Any oil price volatility is something the market is watching closely," Miskin said. "If oil prices keep going up, it increases inflation, and then that ​increases the likelihood that the ​Fed needs to hike."PPI, RETAIL SALES, TECH EARNINGS ⁠ALSO ON TAPThe monthly report on producer prices, due a day after CPI, will also flesh out the inflation picture. Retail sales data on Friday offers a view into consumer spending, which is a key gauge for the strength of the broader economy.After a flood of quarterly reports the past few weeks, the earnings calendar hits a relative ​lull. But the high-flying AI and tech trade still could be sensitive to reports next week, including from semiconductor company Applied Materials, networking equipment maker Cisco and cloud infrastructure technology company CoreWeave.Semiconductor shares in particular have driven the stock market's rally this year, with the companies expected to benefit from massive spending on AI data centers. The Philadelphia SE Semiconductor index is up 70% in 2026, but the SOX index remains down more than 17% from its late-June high and is seeing huge swings on a daily basis."We need to see more technical recovery across a number of the SOX components to really be convinced that the worst is behind us," Orton said. "Earnings have generally been encouraging, but there's still more work to do before we can say we're out of the woods." (Reporting by Lewis Krauskopf, editing by Colin Barr and Aurora Ellis)