CNBC Daily Open: U.S. inflation report on Friday will tell if rate cut was a good idea

The U.S. personal consumption expenditures price index for August comes out Friday. The Federal Reserve will hope the report shows headline inflation is either in line or below economists' forecast of 2.8% for the year. Any higher, and investors might start worrying that the Fed's quarter-point cut last week was premature and could allow inflation to sink its claws into the economy again.

Indeed, the yields on the 10-year and 30-year Treasurys rose following the rate cut — rather counterintuitively, since they tend to follow the direction in which interest rates move. Of course, there are other factors that influence yields, such as the level of government debt and fiscal policy. Hence, movement by Treasurys could suggest that the bond market was not convinced the current economic situation in the U.S. warrants a cut.

The stock market, however, seemed to have brushed off those concerns. On Friday, the S&P 500 and Dow Jones Industrial Average closed at another record. Moreover, all three major U.S. indexes had a strong showing for the week, with the Nasdaq Composite climbing 2.2%.

Hindsight clarifies decisions. It grants one the power to gloat, "I told you so," or inflict an embarrassment that will keep one awake at 2 a.m. Fingers crossed that, for the Fed, hindsight is 2.8%/2.8%.