Key Points

• This is a tone-setting week for the stock market, highlighted by today's (July 30) 08:30 a.m. ET release of the Personal Consumption Expenditures (PCE) data.

• Core PCE forecasts, which exclude volatile food and energy costs, have been especially sticky, suggesting that Iran-war-driven inflation has spilled over into the broader economy.

• Core PCE is one of the Federal Reserve's favorite inflationary measures and can help foreshadow future interest rate adjustments.

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This is a tone-setting week for the stock market. The immediate future of the time-tested Dow Jones Industrial Average (DJINDICES: ^DJI), benchmark S&P 500 (SNPINDEX: ^GSPC), and growth-dependent Nasdaq Composite (NASDAQINDEX: ^IXIC) will be determined by the busiest week of earnings season, the Federal Reserve's latest meeting, and one data release that far too many investors are overlooking.

Thanks to Fed Chair Kevin Warsh removing forward-looking guidance from Federal Open Market Committee (FOMC) meeting statements, the July 29 FOMC meeting on interest rates created far more buzz and uncertainty than usual.

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But the most telling data point on inflation and the future of interest rates is set to be released today, July 30, at 08:30 a.m. ET by the Bureau of Economic Analysis (BEA).

The most relevant inflationary data point is on deck

Most investors tend to focus on the mid-month release of the Consumer Price Index. This provides a neat trailing 12-month (TTM) headline figure that's used to determine if prices are collectively rising or falling.

For example, the Donald Trump-led Iran war caused Iran to close the Strait of Hormuz to virtually all maritime traffic, cutting off the movement of roughly 20 million barrels of liquid petroleum per day. The largest energy supply disruption in modern history sent TTM inflation from 2.4% in February to a three-year high of 4.2% in May. Although peace talks between the U.S. and Iran sent crude oil prices tumbling in June -- headline inflation dropped to 3.5% in June -- they've bounced back in a big way in July.

However, headline inflation hasn't historically been the preferred metric used by FOMC policymakers when making interest rate decisions.

At 08:30 a.m. ET, the BEA will release the Personal Consumption Expenditures (PCE) data. Of particular interest is Core PCE, which excludes volatile food and energy costs.

The Fed's preferred measure of inflation (Core PCE) moved up to 3.4% in May, the highest level since October 2023.

-- Charlie Bilello (@charliebilello) June 25, 2026
This was the 63rd consecutive reading above the Fed's 2% target level.
"We've missed for 5 years. And we're gonna fix that."-Kevin Warsh last week pic.twitter.com/Wtayfgt8sq

What's noteworthy about Core PCE is that forecasts for June and July have hardly budged despite headline inflation dipping from 4.2% in May to 3.5% in June. According to the Federal Reserve Bank of Cleveland's Inflation Nowcasting tool (as of July 28), Core PCE is projected to ease slightly in June to 3.33% from 3.4% in May. However, it's projected to inch higher to 3.36% in July.

This discrepancy we're witnessing between headline inflation and Core PCE estimates from the Cleveland Fed suggests that the inflationary effects of the Iran war are hitting consumers outside of the energy sector. Though fuel prices continue to be whipsawed, we're seeing evidence that altered shipping routes and higher costs for petroleum-based products, such as plastics, are increasing prices for consumers.

If Core PCE comes in below expectations, it would be a potentially significant boost to a historically pricey stock market that's been driven higher by a partially debt-financed artificial intelligence (AI) data center build-out.

On the other hand, a hotter-than-anticipated Core PCE figure today would represent a worst-case scenario for the second-priciest stock market in history. For Fed Chair Warsh and the FOMC to stabilize prices, more than one interest rate hike would likely be necessary. Any disruption to the AI infrastructure build-out may prove disastrous to Wall Street.

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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.