The stock-market rally keeps spreading beyond Big Tech. October inflation data could put it to the test.

By Isabel Wang

Tuesday's CPI inflation report and a heavy lineup of Federal Reserve speakers could test the rotation trade's resilience

Inflation data is due Tuesday, and more Fed speakers on are deck this week.

The stock market finally has been showing it can do more than ride on the backs of its biggest tech names.

Over the past month, the equal-weighted S&P 500 XX:SP500EW has outperformed its market-cap-weighted cousin SPX by the widest margin since 2009, with the sharp selloff in chip stocks pulling down the stock market's heavyweights.

Traders now will have Tuesday's consumer-price index for October to contend with and a heavy lineup of Federal Reserve speakers this week that could test just how durable the rally looks beyond tech.

Concerns about the rising costs of the massive artificial-intelligence buildout, and whether all that spending will pay off, have been pressuring chip stocks that powered the broader market higher for most of 2026.

Last week's midterm elections added another worry, with Democrats winning control of the Senate, House and many state offices, raising concerns about whether tougher AI regulations and new hurdles for data-center development could be afoot when they take office in early 2027.

Investors had rotated into other parts of the S&P 500, with previously lagging corners such as healthcareXX:SP500.35, consumer staples XX:SP500.30, real estate XX:SP500.60 and materials XX:SP500.15, seeing strong gains over the past month. Meanwhile, the AI-related information-technology XX:SP500.45 and communication-services XX:SP500.50 sectors have been hammered over the past 30 days.

"Information technology has gone from penthouse to outhouse, and slumped from being the best performer to the worst," said Russ Mould, investment director at AJ Bell, of the shift in tone since the first half of 2026. Meanwhile, energy has been resilient, as have consumer staples and healthcare, he added.

These trends could reflect "nagging worries" over the economic outlook for next year, as well as concerns over whether air is leaking out of an AI trade, Mould told MarketWatch on Monday.

Concerns about the AI trade appear to have been playing a bigger role in driving the stock market's rotation trade than the broader economic outlook. But this week's inflation report and full slate of Fed speakers will put the macroeconomic backdrop back in focus, particularly with another interest-rate hike in December still on the table.

"The rate environment has been an under-discussed driver of this rotation trade," said Mark Hackett, chief market strategist at Nationwide's Investment Management Group.

A hotter-than-expected inflation print and aggressive tones from Fed speakers would push investors further out of technology names and into other corners of the stock market, Hackett told MarketWatch.

"Because there's a nervous investor base right now, the tech companies are going to be the more reactive sector [to inflation data]," he said. "So, if inflation is elevated, there will be a knee-jerk selloff in tech," Hackett predicted.

With oil prices (CL.1) (BRN00) still elevated from the Middle East conflict, the headline CPI figure for October is expected to rise 0.3% from a month before, while core CPI, which excludes volatile food and energy prices, is forecast to rise at a monthly rate of 0.2%.

The Bureau of Labor Statistics will not publish an annual inflation rate for October because of the data disruption from last year's government shutdown. Still, FactSet puts the median estimate for annual headline CPI at 4.0%, up from 3.7% the previous month.

An inflation surprise to the upside on Tuesday could increase the odds of more Fed rate hikes. The odds on Monday were over 83% for a rate increase in December, while leaving the door open for further tightening in 2027, according to the CME FedWatch Tool.

Higher interest rates typically hit technology stocks in two ways: They reduce the value of future profits and raise borrowing costs. Hyperscalers in the past few decades carried almost no debt, but they have raced to borrow in the past year to finance chips, data centers and computing infrastructure.

Still, investors haven't pulled money out of the stock market altogether. Many investors selling tech stocks have been looking for opportunities elsewhere, which has led to the rebound in the stock market on Monday, Hackett said.

People are starting to "realize that there's a whole lot of other companies out there, and by the way, these are the companies that are now benefiting from AI and developing these AI capabilities," he said. Those investments are now beginning to translate into productivity gains and accelerating profit margins, potentially creating new opportunities outside the technology sector, Hackett added.

U.S. stocks surged Monday. The Dow Jones Industrial Average DJIA rose over 1,100 points, or 2.2%, while the S&P 500 gained 2.4% and the Nasdaq Composite COMP jumped 2.7%, according to FactSet data.

-Isabel Wang

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11-09-26 1624ET