Inflation Data in Focus as Tech Weakness Pressures Equities

Inflation data is set to determine the next move in U.S. equities. Investors are closely watching the release of the January Consumer Price Index (CPI), which could shape expectations for Federal Reserve policy and near-term market direction.

CPI Expectations and Policy Implications

Consensus forecasts call for both headline and core CPI to rise 0.3% month-over-month and 2.5% year-over-year. Our baseline scenario suggests more moderate inflation pressure, with headline CPI increasing 0.19% and core CPI rising 0.24%.

Such results would leave room for two or more Federal Reserve rate cuts in 2026.

If CPI prints in the 0.3–0.4% range month-over-month, markets may interpret it as a temporary spike rather than a structural reversal of the disinflation trend.

A particularly bullish signal would be core CPI near 0.2%. That outcome would reinforce expectations of a faster easing cycle. A stronger-than-expected print, however, could temporarily cap upside in risk assets.

Technical Picture: Key Levels in Focus

In the previous session, the S&P 500 broke below 6900 and its 50-day moving average, closing near 6830. The Nasdaq declined from a local descending trendline and approached the key 24,500 support level.

Futures are now consolidating.

• SPX support: 6800
• SPX resistance: 6900
• NQ support: 24,500
• NQ resistance: 25,000

A break below 6800 on the S&P 500 could accelerate downside momentum and open the path toward deeper support zones. Hold above support — rebound scenario remains intact.

AI Sector Shifts From Driver to Pressure Point

The AI sector, previously a primary growth engine, has recently turned into a source of margin pressure and a catalyst for sell-offs. Continued weakness in technology stocks has coincided with capital rotation into defensive assets.

Macro Backdrop

• Initial jobless claims: 227,000, slightly above expectations.
• Existing home sales: 3.91 million, below consensus of 4.27 million.
• Treasury yields declined amid demand for bonds ahead of CPI.
• Technology stocks remain under pressure.

Sector Performance

Cyclicals: Mostly negative. XLF and XLE led declines. ITA and XLRE closed modestly higher.

Growth: Broad weakness. IPO, XLK, TAN, and SOXX led declines.

Defensives: Predominantly positive. XLU led gains, while XLV edged slightly lower.

Intermarket Signals

• Oil: Breaking below its local upward channel, trading near 63.
• Yields: Attempting rebound from 4.1% and the lower boundary of a medium-term ascending channel.
• VIX: Testing medium-term trendline resistance near 21.
• Gold: Consolidating near 5000 within a long-term uptrend.

Today’s CPI release will likely determine whether markets stabilize — or whether volatility accelerates into the next leg of price action.