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. 75%, its biggest four-day surge since April 2025.

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.

4% on a year-over-year basis, according to a Reuters poll as of Thursday. 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.