NEW YORK (Reuters) -A spate of inflation data confronts U.S. stock investors in the coming week as markets grapple with fresh uncertainty over tariffs and government bond yields, while equities hover at lofty valuations.

The benchmark S&P 500 index closed at a record high on Thursday despite an uneven start to September, which has been the worst month for stocks on average over the past 35 years.

"September has been known to see a wearing down of the sentiment picture," said Matthew Miskin, co-chief investment strategist at Manulife John Hancock Investments. 

At the same time, he said, "stocks aren't pricing in a lot of risks right now. They look fully valued."

The monthly U.S. consumer price index on Thursday highlights next week's economic releases, with investors focused on signals from the inflation data about the prospects for interest rate cuts and the fallout from tariffs on prices.

Following Federal Reserve Chair Jerome Powell's remarks late last month that flagged rising risks to employment, markets have been widely expecting the central bank to lower rates for the first time in nine months at its September 16-17 meeting.

Fed Fund futures were baking in a 96% chance of a quarter-point rate cut at the meeting, LSEG data as of Thursday showed, so only a CPI number that comes in "egregiously higher" than estimates could dent assumptions of imminent monetary policy easing, said Art Hogan, chief market strategist at B Riley Wealth.

About 58 basis points of easing, or slightly more than two standard cuts, are projected by December, according to the futures data.

Recently, "the prospect of the Fed cutting has been the overwhelming factor driving equity sentiment to be more positive," Miskin said. "And so if that reverses, then it could be problematic for equities."

Along with CPI, a Wednesday report on producer prices could also reveal impacts from import tariffs. Last month's PPI data showed U.S. producer prices increased by the most in three years in July as the costs of goods and services surged.

Tariffs and their implications for the economy were the main risk facing markets earlier this year, but other factors such as questions over Fed independence and caution about the artificial intelligence trade have been more prominent recently.

The issue returned to the fore this week after a U.S. appeals court ruled that most of President Donald Trump's tariffs are illegal. While the Trump administration since asked the U.S. Supreme Court to hear a bid to preserve the sweeping tariffs, the ruling injected fresh uncertainty for markets.

"It felt as though the fog of trade war was clearing, and now we're just back into the thick of it," Hogan said. "And that doesn't help corporate America make decisions, consumers make decisions, and investors make decisions." 

The potential of lost tariff revenue exacerbating the U.S. fiscal deficit was one factor investors said may have driven long-dated U.S. government debt yields sharply higher at the start of the week, moves that also followed big jumps in yields in the UK and other regions.

While long-dated yields globally have since calmed, their spikes were cited as contributing to stock weakness initially during the week.

The 30-year U.S. Treasury yield this week hit 5% for the first time in over a month. That yield level has been "problematic" for risk appetite over the past few years, said Adam Turnquist, chief technical strategist for LPL Financial. The long-bond yield was last around 4.88%.

The S&P 500 was up over 10% so far in 2025, helped recently by a solid second-quarter earnings season. The S&P 500's price-to-earnings ratio climbed to 22.4 times, based on earnings estimates for the next 12 months, a valuation well above its long-term average of 15.9, according to LSEG Datastream.

"Investors face ongoing threats from trade and tariff unknowns as well as potential economic releases ... that could ultimately challenge elevated stock valuations," Anthony Saglimbene, chief market strategist at Ameriprise Financial, wrote in a commentary.

"That said, investors have been navigating those dynamics for months, and stocks have continued to grind higher."