Here is Schwab's early look at the markets for Tuesday, August 12.

It's only Tuesday but today could be the keystone this week as investors brace for the Consumer Price Index at 8:30 a.m. ET.

A hot CPI might drive Treasury yields higher and raise questions about Federal Reserve rate policy. Yields move the opposite way of the underlying Treasury notes. Analysts expect 0.2% monthly July headline CPI growth and 0.3% core, which excludes food and energy. That compares with 0.3% and 0.2% in June. But investors will drill deeper after June showed tariff-related impacts from rising furniture and apparel prices and steeper inflation affecting a wider number of items.

"Market resilience is likely to be tested as inflation data hit," said Kathy Jones, chief fixed income strategist at Schwab. "The CPI and PPI reports are starting to reflect the impact of various policy changes implemented earlier in the year—trade policy and tariffs, immigration restrictions, and expansive fiscal policy."

The July Producer Price Index, or PPI, report, is due Thursday and measures prices at the wholesale level.

Annual core CPI growth is expected to be 3% in today's report, up from 2.9% in June and the highest since February.

One item worth watching is the percentage of products tracked by CPI climbing dramatically versus just rising. The last CPI report showed 40% of items up 4% or more in price annually, a large amount considering overall CPI rose 2.7% in June. The percentage of items climbing 4% or more peaked near 60% in mid-2022 but remains well above the 20% often seen before the pandemic. Early last year, Atlanta Fed President Raphael Bostic said this is a metric he watches closely.

Though furnishings and recreational goods were among categories in CPI affected by tariffs last month, services-related inflation for things like air travel and shelter recently stabilized or fell. If that spilled into July, it could help offset additional goods inflation.

Chances for a September rate cut reached 86% by late Monday, according to the CME FedWatch Tool. Fed Vice Chair Michelle Bowman said over the weekend she could see three rate cuts this year based on soft jobs data. There's already growing support for a September cut and only a 12% likelihood the Fed would stop there, the FedWatch Tool shows.

"We expect two rate cuts this year, as the nonfarm payroll revisions suggest the labor market is weaker than the initial data suggested," said Collin Martin, director, fixed income strategy at the Schwab Center for Financial Research. "With the push and pull of a weaker labor market and above-target inflation, the Fed may focus on its maximum employment mandate since it can’t do much to offset tariff-induced increases of goods. The Fed can help more with the impact of weaker discretionary spending due to a softer labor market than it can with high prices from trade policy."

While a hot CPI could cause bumps in the market, the recent past shows investors buying just about every dip, led by the biggest tech stocks. Hopes for rate easing not just in the U.S. but abroad helped shape the tailwind, with 20 central banks now in easing cycles.

There aren't as many Treasury auctions on tap this week, but soft demand for several major ones last week raised eyebrows along with the 10-year Treasury note yield. With the government turning out increasing levels of debt to finance, any hesitance from investors to buy debt at current yields might mean pressure on Treasuries and possibly higher borrowing costs down the road.

Even so, credit spreads remain very tight and may be a better proxy for U.S. economic health. This means borrowers have relatively easy access to cash.

President Trump on Monday announced a 90-day extension of the three-month deadline for the U.S. and China to formulate and agree on tariffs. That means investors will have until November 9 to fret over possible tariffs, though the two countries evidently made progress during negotiations last month. The announcement temporarily took one pressure point off the market, but stocks didn't show much response as that decision was widely expected.

Stocks stayed in a holding pattern most of the day Monday ahead of CPI but finished on a weak note as selling accelerated in the last hour, perhaps on pre-CPI caution. Softness was widespread, with just one sector, staples, finishing higher, and health care unchanged.

This lean toward defensive sectors showed up on a few days last week and might raise eyebrows if it continues, especially considering the market's in a seasonally weak period. It's also worth noting that with the info tech sector down 0.7% following last week's rally, no other sector came along to pick up the pieces. Market breadth fell slightly to just 54% of S&P 500 stocks trading above their 50-day moving averages, well off the late-July peak of 75%.

Looking at individual stock performance Monday, Intel climbed 3.7% as The Wall Street Journal reported that Intel's CEO would visit the White House. Last week, Trump called for the CEO's ouster. Another semiconductor stock, Micron, also rose sharply after the firm raised its August quarter earnings per share and revenues above consensus views, citing improved pricing among other factors.

Nvidia and Advanced Micro Devices both fell slightly Monday after the Financial Times reported Sunday that the two chip makers will receive export licenses to sell Nvidia's H20 and AMD's MI308 chips in China in return for the U.S. government receiving 15% of revenues from those sales. Even with Nvidia's profit margin overall near 70%, any hit could be costly. It also raises concerns that the Trump administration could target other large companies for a piece of their revenues.

Treasury yields didn't change much and the 10-year note yield fell one basis point to 4.27% yesterday. The U.S. dollar rose slightly.

The Relative Strength Index (RSI), a popular momentum indicator, finished around 60 Monday for the S&P 500 index, well under the 70 level that signals overbought conditions, but still relatively high. The RSI could be worth tracking this week as earnings ebb and focus shifts more to monetary and trade policy. One thing that could grab attention is if stocks continue pushing their way to new highs even as RSI posts lower peaks. That's called a bearish divergence and suggests momentum may be slowing.

Technically, the S&P 500 remains in a tight range between 6,300 and 6,400. It topped 6,400 briefly intraday Monday only to dip below it and hasn't closed above that level. Friday's close just below the all-time high was a technical disappointment, but buying has generally shown up at the 20-day moving average near 6,325 the last three months. There's a similar pattern of 20-day moving average support in the tech-heavy Nasdaq 100 index (NDX). The Russell 2000 (RUT) index enjoyed a positive development last week when its 50-day moving average topped its 200-day moving average for the first time since March.

The Dow Jones Industrial Average® ($DJI) slipped 200.52 points Monday (-0.45%) to 43,975.09; the S&P 500 index (SPX) dropped 16.00 points (-0.25%) to 6,373.45, and the Nasdaq Composite® ($COMP) lost 64.62 points (-0.3%) to 21,385.40.