Stocks found some certainty on Friday from a new inflation report that was strong enough to cement bets on a Fed rate hike next week.

The firmer ground steadied a worrying early September slump just before third-quarter earnings season.

But the market hasn't extracted itself from the inflation problem, which is clearly tied to the Iran War. It has kept a lid on stocks for much of the past three months, and threatens to blunt the power of American consumers into the holiday season-the year's busiest time for retailers.

August inflation wasn't searing, despite the big jumps in crude prices over the summer.

Still, higher-than-expected increases in both the core and headline numbers of the consumer price index have all but closed the case for a quarter-point rate increase by the Fed next week. Chairman Kevin Warsh has been firm about bringing inflation down to the central bank's annual 2% target rate.

"Taken together, the details of the report suggest that underlying inflationary pressures continue to be sticky and the Fed will have to hike in order to help inflation return toward the 2% target," said Jeff Schulze, head investment strategist at Franklin Templeton Institute.

"It solidifies the case for several rate hikes in the near-term and will not be a material driver to risk assets."

The CME Group's FedWatch tool pegs the odds of a quarter-point increase next week at 86%, up from 50% just a month ago. The chances of another increase before year's end stand at 63%.

Still, stocks rejoiced. The S&P 500 rose more than 65 points by the close of Friday trading and pared a tough week of declines.

The more important moves, however, were in the bond market, where the 10-year Treasury yield retreated from its flirtation with 5%, a level last touched in 2023. It closed out the session at 4.97%.

An overnight pullback in crude prices helped as well. Brent futures fell 3% to $104.50 after reports of a possible meeting of Gulf states to negotiate a peace deal.

Oil, though, has climbed some 37% higher over the past two months, and is holding north of $100 a barrel for a third consecutive session.

Consequently, gas prices are at $4.30 a gallon on Friday, up almost 35% from last year. And diesel fuel topped $6 a gallon for the first time ever.

Make no mistake. Those figures are going to play into the inflation readings over the coming months. Coupled with August's unpleasant core increase, higher energy prices are embedding themselves in the world's biggest economy.

And Americans know it. Consumer sentiment data is fading fast: the University of Michigan's key reading for September fell to 47.8-off nearly 4 points from August and not far from May's reading, which was the lowest so far this year.

"The double headwinds of rising bond yields and oil prices are now testing the market's resilience, but stocks have not lost their key pillar of support, which is fast-rising earnings," said Angelo Kourkafas, senior global strategist at Edward Jones.

Here's the rub, though. The next earnings season doesn't kick off until Oct. 13, when JPMorgan reports.

Wall Street is still looking for another blockbuster set of reports. The collective S&P 500 tally is $768.7 billion for the three months ending in September-nearly 30% higher than last year-paced once again by tech and bank stocks.

Until then, it might be difficult for stocks to ignore all of today's pressures: crude prices, an uncertain job market, and the outrageous AI investment spending. And, of course, the rise in Treasury yields.

Bret Kenwell, U.S. investment analyst at eToro, thinks the Fed's commentary next week will go a long way toward defining the bond market's next move.

"If the Fed presents [a rate increase] as insurance against renewed inflation rather than the beginning of a prolonged hiking cycle, markets could interpret it as a 'dovish hike'," he said. "That could limit further upward pressure on longer-term yields, even while short-term yields remain elevated."

Whether stocks can power past that kind of mix, where longer-term yields remain near multiyear highs while the market attempts to read the tea-leaves of a Fed remains to be seen.

The S&P 500 has recorded only modest gains since first topping 7500 in mid-May, and end-of-year forecasts suggest only modest gains of 4% to the median Wall Street forecast.

And the November elections are now just two months away.