Good morning! The stock market moved higher on Wednesday as investors welcomed a tame July inflation report and moved bets closer to the Fed keeping rates steady next month. 

The S&P 500 (^GSPC) inched up 0.3%, the Nasdaq (^IXIC) gained 0.5%, and the Dow (^DJI) closed just below the flat line.

What we're watching Thursday: Another crucial inflation report is set for release in the Producer Price Index, offering a preview of pricing pressures before they reach consumers. JD.com (JD), Birkenstock Holding (BIRK), and Applied Materials (AMAT) are also scheduled to report earnings.

Yahoo Finance Morning Brief is written by Ethan Wolff-Mann and Hamza Shaban.

See what else is trending on Yahoo Finance.

The latest inflation data showed price growth easing slightly in July. (AP Photo/Chan Long Hei, File)

The prospects of a course-correcting rate cut just got a little dimmer after the closely watched Consumer Price Index showed pricing pressures eased in July, even as geopolitical conflict has ramped up volatility. 

The CPI rose 3.4% in July, compared to a year ago, inching down from June’s 3.5% annual increase and matching economists' expectations. Central bankers use the reading to gauge where prices are headed and what, if anything, should be done about them. In recent weeks, inflation figures have gained outsized importance because Fed officials are in open disagreement about their next steps. 

The latest reading marks the second consecutive month of cooling inflation. That’s a relief to Fed hawks who worry that the central bank has for too long tolerated stubborn pricing pressures. It may also bolster the case that the energy shocks stemming from the conflict in Iran are working themselves out. 

Two data points are better than one. But positive developments on inflation can be fleeting, or simply not enough to get back to the Fed’s 2% inflation target. With another inflation reading to go before the Fed’s next meeting, the latest report, while a welcome sign, is not conclusive.

Federal Reserve Board Chairman Kevin Warsh speaks during a news conference at the Federal Reserve in Washington, Wednesday, July 29, 2026. (AP Photo/Mark Schiefelbein)

A divided Fed isn’t any closer to reconciliation. That’s because a benign CPI reading showed inflation isn’t worsening, but it isn’t meaningfully improving either.  

Markets on Wednesday rolled back the likelihood that the Fed will raise rates in September, an indication that holding course is the most expected outcome. 

"The U.S. July Consumer Price Index reflected a mild pace of growth in inflation that should result in the Federal Reserve, pending other July and September pricing data, to remain on hold when they make their next policy decision," RSM chief economist Joseph Brusuelas said.

Coupled with lackluster July jobs numbers, which showed weakening hiring, central bankers are confronted with signals pushing against a tightening campaign.

"In-line inflation will keep the 'no need to hike rates' narrative that took hold after last week's jobs report intact," said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management. Unless the next round of inflation figures tells a much different story, Zentner said, “the Fed will likely still be in a position to leave rates unchanged next month."

Gasoline prices climbed on Wednesday, marking their highest level on record for this time of year. (AP Photo/David Zalubowski)

It’s the kind of economic record that hurts to think about. Gasoline prices are at the highest level on record for this time of year.

GasBuddy head of petroleum research Patrick De Haan noted on X that the national average has never been above $4 per gallon after Aug. 12, in any previous era.

After dipping periodically below that level in June and July, gasoline prices turned to their second stretch above $4 per gallon this year. The pain at the pump highlights the contrast between easing energy shocks, measured in the aggregate and involving weeks-long delays, and the economic reality of feeling little escape from rising prices. 

Wednesday’s inflation report showed the gasoline index fell 2.9% in July from June, even as it rose nearly 25% from a year earlier.

Meanwhile, analysts expect further oil supply interruptions. “The final third of 2026 will be considerably more expensive than what we've witnessed in previous years," said Tom Kloza, chief oil analyst at Gulf Oil.

David Ellison, Chairman & CEO, Paramount Skydance speaks on stage during New York Upfront Partnership Event 2026 (Photo by Noam Galai/Getty Images for Paramount)

Paramount Skydance CEO David Ellison is threatening to move his company out of California unless the state settles antitrust claims blocking Paramount from completing its mega media merger with Warner Bros. Discovery.

Multiple reports indicate that Ellison raised the idea during a meeting with the company’s leadership team. Such a move brings to mind Elon Musk’s relocation efforts, when he shifted major operations of his companies, including Tesla and SpaceX, to Texas, amid legal and political conflicts. Other tech companies and investment outfits have moved their states of incorporation, citing what they claim are burdensome regulatory and legal environments. 

Ellison's threat to leave California comes as a federal court set a March trial date to determine if the merger is unlawful. The months-long delay will force Paramount to pay fees to shareholders and financial backers and increases the likelihood that the deal unravels, either by a legal order or the messy drama of a drawn-out battle.

From Ellison’s perspective, the threat of stripping California of tens of thousands of jobs, hampering its media production capacity, and removing tax revenue is a powerful point of leverage. But the states leading the antitrust challenge maintain that a beefed-up Paramount would unfairly dominate aspects of the TV and movie business.