Equity markets pulled back for a second day on Tuesday as markets eye Wednesday's CPI report. The report is expected to show consumer prices are still rising at an above-target pace, and there is little hope for cooling. The core PPI reading is expected to accelerate on a month-to-month basis and may lead to a hot YOY reading. Even if the reading cools, with inflation still rising, the Fed can not be expected to ease back on the interest rate throttle.

The S&P 500 is at a critical juncture; the next few days could decide the market's direction over the next 3 months. If the index can get its feet under it and move above 4,150, it could extend the rally to 4,300 or higher. Aside from inflation and the FOMC, the risk is that the outlook for 2nd half earnings growth resumed its slide. The consensus figures are now at the lowest level on record and are weighing heavily on stock market prices.