Market Analysis by Felipe Barragán, Expert Research Strategist at Pepperstone

“The market opened with a clear “policy-pivot” tone. Friday’s weak payrolls cemented the view that the Fed’s next move will be a cut at the Sept. 16–17 meeting, with futures heavily skewed to 25 bps and a small tail for 50 bps. It appears the market is no longer asking if the Fed is going to cut, but the question is how big is the cut. The Fed now enters blackout with CPI and PPI still to come—prints that could either lock in those bets or unravel them. As a result, the index is trading off the path of policy, not earnings headlines.

Flows added fuel. The S&P 500 reshuffle put AppLovin, Robinhood and Emcor into the spotlight ahead of their Sept. 22 inclusion. That triggered passive-flow demand and a wave of forced buying.  So far it has been liquidity, not fundamentals, doing the talking. The effect spilled into ad-tech, payments and retail-trading, giving the day’s risk appetite an extra push.

AI remains the market’s north star. Broadcom’s upbeat outlook—anchored by custom AI silicon revenues—and reports of an OpenAI–Broadcom chip partnership reinforced the narrative that AI capex into 2026 is building, not fading. Investors continue to buy dips in the complex since as long as order books are growing, the AI trade stays alive.

But the air is thin. Valuations are stretched into data that can still surprise. July’s benign CPI was followed by a hotter PPI. This week’s prints will test whether disinflation is intact or slipping away. If CPI undershoots, the “insurance cut” story gains traction and multiples stay supported. If services inflation re-firms, the market’s extrapolation of multiple cuts into year-end will start to look a bit aggressive.

For now, flows, AI and easing hopes keep the S&P near highs. But with positioning long and conviction fragile, the tape is vulnerable to a single data shock or hawkish repricing that lifts real yields.

Bottom line: the rally rests on three legs—rate-cut conviction, AI’s still-credible earnings runway, and passive-flow catalysts. The first is the weakest. If CPI/PPI and Fed messaging validate the insurance cut narrative, dips stay shallow. If not, megacap leadership gets tested and valuations wobble.”