U.S. stocks are rising and government bond yields are retreating Wednesday morning after inflation cooled modestly in July.

Consumer prices increased 3.4% year-over-year, down from 3.5% in June and in line with economists' expectations. On a month-over-month basis, consumer prices increased 0.1%, also landing right on forecast.

Wednesday's report is a critical data point for investors ahead of next month's Fed meeting, as traders remain divided on whether officials will hold rates steady or raise them by a quarter-percentage point. Last week's jobs report offered officials some room to hold them, and Wednesday's reading may strengthen that case. Expectations that rates will stay unchanged increased slightly after the report's release.

Outside of Wednesday's CPI report, stocks are finding support from companies tied to AI, which are rising after blockbuster results Tuesday afternoon from cloud-computing company CoreWeave and server company Super Micro Computer.

Meanwhile, oil prices are swinging between small gains and losses, with Brent crude futures heading back toward $90 a barrel, as hope for a deal to reopen the Strait of Hormuz dims once again.