U.S. Stocks Slip Ahead of Key Inflation Data; Fed’s Waller Boosts Tech-Led Rally Earlier in Week

The U.S. stock market headed into Monday’s holiday-shortened week with caution as S&P 500 and Nasdaq futures treaded lower amid renewed geopolitical tensions and rising oil prices. These developments added pressure ahead of critical inflation data due later in the week.

Markets Tread Water Ahead of Inflation Data

On Monday, with U.S. markets closed for Labor Day and futures indicating modest losses, investors grappled with elevated oil prices and lingering uncertainty over Middle East conflicts. Markets were unsettled by reports that Iran will soon announce a restricted zone outside the Strait of Hormuz following recent confrontations involving U.S. forces. Brent crude exceeded $96 a barrel, contributing to investor nerves and slowing equity sentiment heading into the week.
Reuters noted that oil price pressures, ongoing geopolitical risk and light futures trading suggested a muted tone in equities as markets awaited U.S. inflation data later in the week.

Fed’s Waller Sparks Rally Before Pullback

Earlier in the week, markets staged a sharp rebound as remarks from Fed Governor Christopher Waller tempered expectations for a rate hike in mid-September. Waller signaled that if upcoming data confirms easing inflation, he would support holding rates steady—nudging markets to scale back expectations for a rate increase. According to CME’s FedWatch tool, the probability of a hike dropped to roughly 50%, down from over 63%.
This shift fueled a broad rally: the S&P 500 surged over 1%, the Nasdaq Composite climbed about 1.4%, and the Dow Jones Industrial Average gained more than 600 points. Tech megacaps, notably the so-called “Magnificent Seven,” led the advance, with AI-focused names driving strength amid easing hawkish sentiment.

Outlook and What’s Next

As markets weigh these early-week gains against rising geopolitical and inflation concerns, all eyes are on upcoming U.S. inflation data. A stickier-than-expected report could reignite rate-hike fears and pressure equities. Conversely, signs of cooling inflation could validate Waller’s cautious stance and extend the week’s rebound. Investors will also monitor developments in oil markets and geopolitical flashpoints closely, given their outsized influence on inflation expectations and risk sentiment.