Markets are rebounding after last week's AI sell-off, and tomorrow's inflation report could decide whether the Fed hikes rates in December — good news for investors if inflation keeps cooling.

• Tomorrow's inflation report is the big one the Fed will actually use for its December decision, since the next report comes out too late to matter.
• Inflation expectations have dropped sharply, which takes pressure off the Fed to raise rates again.
• Big banks like Morgan Stanley and Bank of America say AI spending will keep growing faster than feared, even with more regulation expected after the midterm elections — good for Amazon, Meta, Microsoft, Nvidia, and SpaceX.
• Microsoft is quietly pulling back from some AI computing deals (including with Oracle) as it shifts spending toward AI "agents" instead of just training, which has some investors nervous about overspending.
• Chip and storage stocks (Micron, SanDisk, Seagate, and others) are trading at unusually low prices, seen as a buying opportunity.

Outlook: If tomorrow's inflation numbers keep improving, expect the rally to continue and a December rate hike to become less likely.