The bond market is setting the tone before Wall Street opens. The yield on the 10-year Treasury note is hovering near 4.7%, its highest level this month, after climbing more than four basis points to 4.705% earlier this week. Rising oil prices are the main driver, reviving concern that inflation could prove stickier than the Federal Reserve wants.

Crude has pushed higher on renewed Middle East tension. Brent futures traded near $89.65 a barrel early Wednesday, while West Texas Intermediate rose toward $84.00, as uncertainty over a US-Iran deal to reopen the Strait of Hormuz kept a bid under energy prices. Higher fuel costs feed directly into transport and production expenses, and the bond market is treating that as an inflation risk.

Stock futures are steadier. S&P 500 futures were up about 0.1% and Nasdaq-100 futures gained roughly 0.25% in early trading, as investors held back ahead of the day’s main event.

The July CPI report is the tiebreaker

At 8:30 a.m. ET, the Bureau of Labor Statistics releases the Consumer Price Index for July. Economists surveyed by Dow Jones expect headline prices to rise 0.1% from June and 3.4% from a year earlier, a slight cooling from June’s 3.5% annual pace. Core CPI, which strips out food and energy, is forecast to increase 0.2% on the month and ease to 2.5% year over year from 2.6%.

That combination — a firm headline number pressured by energy, with a slowly cooling core — is exactly what has split the Fed. The central bank left its benchmark rate unchanged at 3.50%–3.75% on July 29, but three policymakers dissented in favor of a hike, an unusually hawkish signal. A hot CPI print would strengthen their case; a soft one would let the doves point to the labor market instead.

Why the labor market complicates the picture

The other half of the story is jobs. The US economy unexpectedly shed jobs in July, and that miss has reshaped rate expectations. According to CME Group’s FedWatch tool, traders now lean toward the Fed holding rates steady in September, with the probability near 60%, while a shrinking minority still price in a quarter-point hike. A week earlier, hike odds had been closer to a coin flip.

This is the crosscurrent driving Treasurys: a weakening labor market argues for patience, while an oil-fueled inflation scare argues for staying restrictive. When those forces pull in opposite directions, the result is a market caught between a possible stagflation scenario and a hoped-for soft landing. The 10-year yield near 4.7% reflects investors demanding more compensation to hold longer-dated debt until the picture clears.

For readers weighing what higher yields mean for their own portfolios, it is worth understanding how fixed-income securities respond when rate expectations shift. Bond prices fall as yields rise, so a sustained move higher can dent the value of existing holdings even as new buyers lock in richer coupons.

Earnings and the rest of the calendar

Corporate results add another layer today. Cisco Systems reports fiscal fourth-quarter earnings after the close, with Wall Street expecting roughly $1.17 in earnings per share on about $16.83 billion in revenue. Investors will watch the company’s artificial-intelligence infrastructure orders, which management has guided toward roughly $9 billion for the fiscal year, as a read on enterprise tech demand.

The inflation data, though, remains the day’s fulcrum. A quick refresher on how the numbers work — and why a single tenth of a percentage point moves markets — is available in Money’s guide to what inflation is and how it is measured.

What to Watch for the Open

  • July CPI at 8:30 a.m. ET: headline forecast at 3.4% year over year, core at 2.5%. A hotter reading would likely push yields higher and pressure stocks; a cooler one could ease the September-hike worry.
  • The 10-year yield: a decisive break above 4.7% would signal the bond market is bracing for higher-for-longer policy. A retreat toward 4.5% would suggest relief.
  • Oil prices: further gains in Brent and WTI on Hormuz headlines would keep the inflation narrative alive regardless of the CPI print.
  • Cisco earnings after the close: guidance on AI orders will shape sentiment for the tech-heavy Nasdaq into Thursday.

For most investors, the sensible move is to watch the reaction rather than pre-position. The July inflation report will not decide the Fed’s September vote on its own, but paired with a softening jobs market, it will tell Wall Street which risk — inflation or slowdown — is now in the driver’s seat.

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