Market Outlook Before Tuesday’s opening bell, the BLS reported that headline July CPI was +2.70% YoY, below consensus estimates of 2.8% and just within the top end of Hedgeye’s estimated range of 2.72%. In any event, we got the dovish market reaction that we anticipated as the September S&P 500 futures finished stronger. With the SPX finishing at 6445, we would not be surprised if market makers pin the S&P 500 around the 6450 strike going into Friday’s monthly options expiration. The July PPI inflation report comes out of Thursday morning, but the PPI is usually less impactful than the CPI. While Friday also offers retail sales and industrial production data, option positioning is likely to be the tail that wags the dog for the remainder of the week. President Trump is also scheduled to meet with President Putin on Friday, so that’s a potentially bullish wild card to throw into the mix if it appears the US and Russia are on the same page to end the Ukraine/Russia war. Expect the unexpected as Mr. Trump may offer Russia economic incentives to encourage a peace deal. Who knows what will happen, but it is more likely that we get good news out of a Trump/Putin meeting versus bad news. How could it get worse? According to the CME FedWatch Tool, odds of a rate cut by the September 17 FOMC meeting are 94.4%.

Nervousness over Tuesday’s July CPI report likely contributed to Monday’s weakness in US equities. Bloomberg consensus estimates for Tuesday’s CPI report is +2.8% YoY versus Hedgeye’s estimate of a slight deceleration to 2.60%. Hedgeye’s expected range for July CPI is 2.49% to 2.72% with a base case of 2.60%. In other words, there is a good chance that we see a dovish surprise on Tuesday. A dovish CPI means that rate cut odds will increase and US equities will likely rally in the very short run if the data agrees. This coming Friday is also the monthly options expiration and Tier1 Alpha estimates that $1.6 trillion in notional S&P 500 option value is set to expire or be rolled. Typically (but not always), the monthly options expiration leads to pinning action around high open interest option strikes. According to the CME FedWatch Tool, odds of a rate cut by the September 17 FOMC meeting are 86.5%.

Market Outlook We think US equities are already looking ahead to next Tuesday’s July CPI report. A slight deceleration in CPI inflation would likely increase odds of additional rate cuts before year-end. With the Fed about to reluctantly enter a rate cutting cycle, and earnings coming in strong, bullish trends in the S&P 500, Nasdaq 100 and Russell 2000 are likely to continue with buyable dips along the way. In fact, the global macro outlook steadily improves for bulls all the way through Q1 of 2026. Large-cap earnings continue to improve as earnings season winds down. According to Hedgeye, with 453 S&P 500 companies reporting, Q2 earnings are now up 11.4% YoY. Nasdaq 100 earnings are up a whopping 36.2% YoY and the Russell 2000, who until now has been stuck in a earnings recession, reports Q2 earnings that are up roughly 14.2% YoY. There is nothing bearish about those results. Combine those numbers with an impending rate cuts and you have a very bullish cocktail for US equities. According to the CME FedWatch Tool, odds of a rate cut by the September 17 FOMC meeting are 89.4%. In fact, rate markets are pricing 3 consecutive 25 basis point rate cuts over the next 3 FOMC meetings