Investors are closely watching inflation data and Federal Reserve interest rate decisions, while anticipating Apple's new iPhone launch and significant changes within the S&P 500 index.

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U.S. stock futures showed modest gains as investors prepared for crucial inflation data releases and anticipated potential monetary policy adjustments from the Federal Reserve. Concurrently, attention turned to Apple's upcoming iPhone 17 launch and the significant rebalancing of the S&P 500 index.

The Week's Key Market-Moving Events

Easing Inflation Data Fuels Rate Cut Hopes

The financial markets reacted positively to softer-than-expected inflation data. The U.S. Labor Department's Bureau of Labor Statistics reported that the Producer Price Index (PPI) for final demand unexpectedly dipped 0.1% in August, a sharper decline than economists' forecasts of a 0.3% advance. This followed a downwardly revised 0.7% increase in July. On a year-over-year basis, PPI growth slowed to 2.6%, falling below analysts' expectations of 3.3%. Both services prices, which fell 0.2%, and goods prices, which edged up 0.1%, contributed to this moderation.

This cooling inflation data has bolstered expectations for a Federal Reserve interest rate cut. Traders are currently pricing in an 88% chance of a quarter-point rate reduction at the upcoming Federal Reserve meeting next Wednesday. Key U.S. Treasury yields eased in response, with the yield on benchmark U.S. 10-year notes falling 2.1 basis points to 4.053%, and the 2-year note yield, sensitive to interest rate expectations, dropping 1.3 basis points to 3.529%. The dollar index also saw a slight dip, falling 0.2% to 97.61 against a basket of currencies.

Apple Unveils New iPhone 17 Lineup

Apple (AAPL) is set to host its highly anticipated "Awe Dropping" event on Tuesday, September 9, where it is expected to unveil the iPhone 17 series, alongside potential updates to the Apple Watch, AirPods, and other accessories. The new lineup is anticipated to include four variants: the iPhone 17 Pro Max, iPhone 17 Pro, iPhone 17 Air, and a standard iPhone 17 model. Industry reports suggest potential price increases for some new models, marking the first such move in seven years for the iPhone, with the Pro Max variant potentially reaching over $1,200.

Leading up to the launch, Apple shares rallied 4% over the past week, though the stock remains down approximately 4.7% year-to-date, trailing the performance of the S&P 500 and Nasdaq 100. Historically, Apple product launches have occasionally triggered a "sell-the-news" dip. Analysts are maintaining a conservative yet stable fiscal 2026 outlook for Apple, with some forecasts projecting 232 million iPhone units sold, generating approximately $220 billion in revenue. Concerns persist regarding Apple's long-term artificial intelligence (AI) strategy, with some analysts noting delays in significant AI features and Siri upgrades until 2026.

S&P 500 Rebalancing Welcomes New Entrants

S&P Dow Jones Indices announced significant changes to the S&P 500 as part of its quarterly rebalancing, effective prior to the open of trading on Monday, September 22. Robinhood Markets Inc. (HOOD), AppLovin Corp. (APP), and EMCOR Group Inc. (EME) are set to join the benchmark index. These companies will replace MarketAxess Holdings Inc. (MKTX), Caesars Entertainment Inc. (CZR), and Enphase Energy Inc. (ENPH), respectively.

This inclusion typically triggers an immediate, short-term positive impact on stock prices due to the "index effect" or "mechanical buying" from index funds and Exchange Traded Funds (ETFs) that track the S&P 500. This phenomenon creates a sudden influx of demand, often leading to price appreciation. Recent data suggests an average outperformance of +7.4 percentage points on the announcement day for new additions in 2025, though this effect tends to be short-lived.

Robinhood (HOOD) shares surged significantly, with gains ranging from 7.2% to 16% following the announcement. The company reported robust second-quarter results, with total revenue climbing 45% year-on-year to $989 million and net income more than doubling to $386 million. Cryptocurrency revenue specifically jumped 98% to $160 million, driven by $28 billion in trading volumes. Its market capitalization stands between $90 billion and $91.5 billion.

AppLovin (APP) also saw its stock surge by 7.2% to 12% after the news broke. The company reported impressive Q2 revenues, growing 77% year-over-year to $1.26 billion, with earnings per share (EPS) at $2.39, a 169% increase compared to the previous year. Net income more than doubled to $819.5 million. Despite strong performance, some analysts view the company as overvalued, noting its 102 Price-to-Earnings (P/E) ratio and a 350% enterprise value/sales premium.

EMCOR Group (EME) shares rose between 2.5% and 2.7% following its inclusion news. The company demonstrated strong growth, with a 17.2% surge in Q2 2025 revenue and an upward revision in its fiscal year 2025 revenue guidance. EMCOR's growth is attributed to strategic acquisitions and a focus on stable sectors like data centers, healthcare, and renewable energy, with an outlook anticipating $20.6 billion in revenue and $1.4 billion in earnings by 2028.

Analysis of Market Reaction

The softer PPI data was a significant catalyst for market optimism, fueling expectations that the Federal Reserve may proceed with interest rate cuts. This outlook is generally viewed favorably by equities, as lower interest rates can reduce corporate borrowing costs and stimulate economic activity. The immediate rallies in major U.S. stock indices, including the S&P 500 and Nasdaq Composite, underscore this sentiment.

Regarding the S&P 500 rebalancing, the rapid price appreciation observed in Robinhood, AppLovin, and EMCOR highlights the profound impact of index inclusion. This effect is driven by the mandate for passive funds to adjust their portfolios to mirror the index composition, creating a surge in demand for the newly added stocks.

Broader Context and Implications

The inclusion of Robinhood, AppLovin, and EMCOR in the S&P 500 signals a broader evolution in the index's composition. This shift favors innovative technology, financial technology, and critical industrial services, reflecting the S&P 500's evolving emphasis on growth-oriented sectors. While the immediate impact is driven by passive fund inflows, the long-term implications for these companies will depend on their ability to sustain growth and adapt to the increased scrutiny that accompanies inclusion in such a prominent index.

Apple's product launch and its pricing strategy could significantly influence the broader technology sector. A successful launch with positive consumer reception could provide a boost, while concerns surrounding its AI strategy and potential price increases will be closely watched for their impact on demand and overall revenue.

Expert Commentary

Commenting on the inflation data, Carol Schleif, Chief Market Strategist at BMO Private Wealth, stated:

"Stocks and bonds clearly liked the PPI report. Inflation came in a bit tamer than many had expected. This data lends credence to the theme that the Fed should not only cut once next week. This increases the likelihood Fed should be able to cut more than once before year-end."

Looking Ahead

Investors will now turn their attention to the upcoming U.S. consumer price data (CPI) scheduled for release on Thursday, which will provide another crucial piece of the inflation puzzle. The Federal Reserve's monetary policy meeting next Wednesday remains a pivotal event, as the market anticipates the central bank's decision on interest rates. Additionally, the market will closely monitor the actual impact of Apple's iPhone 17 launch on sales figures and the tech sector, as well as the continued integration and performance of the newly added stocks within the S&P 500.