Equity markets advanced on Tuesday following a cooler-than-expected CPI report. The headline CPI was flat compared to the prior month, resulting in a 3.2% YOY gain, while the core figure declined to 4.0% YOY and the lowest level in 2 years. The news is on track with the idea that inflation is subsiding and the FOMC will not raise interest rates anymore, causing the S&P 500 to gap higher at the open and rise more than 2.0% at the session's high. The move suggests another attempt by the S&P 500 to cross above the 4,550 level, which could come soon.

The risk for the market is retail earnings. The retailers are reporting this week, and signs of upcoming weakness are already present. The report from HD continues the trend established earlier this year in which quarterly results were better than expected, but guidance was lowered. This situation creates an unstable foundation for markets to rally and may cap gains at the critical level. With the outlook for Q4 earnings growth already receding, weak guidance from the retail sector could send the consensus figure for the broad S&P 500 below 0% and spark the next market correction.