Equity markets tread water on Wednesday as traders and investors await today's critical inflation report. The July CPI report is expected to show inflation remains hot and will lead the FOMC to hike rates again later this year. With oil prices breaking out to new 1-year highs, cool data may not matter because inflation will rise again. The price of WTI is moving steadily higher under the force of supply/demand imbalances put in place by OPEC. The way the market is tilted, it is likely that WTI will soon be tickling the $100 region.

The next hurdles for the market will come next week when the major retailers begin reporting. Consumer spending has underpinned the economy for the last 2 years and is expected to sustain steady results, if not growth, in the retail industry. The question is which retailers will come out on top given the shifts in spending habits caused by inflation. Discretionary names may not fare well.