The S&P 500 moved modestly higher on Tuesday while traders and investors waited for the July CPI report. The report, expected to show cooling inflation, is not expected to alter the trajectory of FOMC interest rate hikes, but that may not matter. The summer market is melting up on AI while most market participants sit on the sidelines in wait-and-see mode. They are waiting to see if the FOMC will cause more banks to fail and spark the recession looming in the last 4 quarters.

The market is melting-up now, but how high it goes depends on the economy. If the economy can withstand another 25 or 50 basis points of interest rates, the S&P 500 could set a new all-time high. The risk is that rising rates will cause more bank failures and other signs of economic distress exist. The pace of layoffs remains robust, suggesting rotation within the labor market as businesses adjusted to the "new normal".