The S&P 500 closed above 5,000 for the first time ever on Friday as the three major averages logged a positive week for the 13th time in the last 14 weeks. With minimal economic catalysts this past week, investors have been scrutinizing corporate results that have exceeded expectations. Federal Reserve officials have largely emphasized that a more confident path downward for inflation is required. The week ahead presents new challenges to the market rally, with a fresh reading on inflation and consumer spending on the economic calendar. About 15% of the S&P 500 is set to report earnings, driven by companies such as John Deere, Coinbase, Airbnb, and Shopify.
During Tuesday, investors expect the Consumer Price Index (CPI) for January, which is expected to show an annual gain of 2.9% for headline CPI and a 3.7% year-over-year increase on a “core” basis. Investors are also anticipating the January retail sales report on Thursday, with economists expecting a decline of 0.2% in retail sales from the prior month. The real wages metric has been in focus as well, showing that the US economy has avoided recession amid higher interest rates.
Earnings breadth is expanding, with 75% of S&P 500 companies having reported earnings, on pace to report its second straight quarter of earnings growth. 83% of US companies are beating earnings estimates, marking the highest level in two years. The consistency in stronger-than-expected data on consumer spending has underpinned the “soft-landing thesis” in the market.
The week’s economic calendar also features data on consumer sentiment, building permits, and the Producer Price Index on Friday. The mixed economic reports and earnings releases could influence market sentiment and future investment decisions. The market continues to experience volatility, driven by various economic, corporate, and geopolitical factors that shape investor perception and risk appetite.