NEW YORK (AP) — The S&P 500 index closed above 5,000 for the first time in history on Friday, capping a positive week for the major averages for the 13th time in the last 14 weeks.
The positive week was driven by a slew of corporate results that exceeded expectations, with few economic catalysts over the past week. Additionally, comments from Federal Reserve officials largely reiterated the central bank’s stance that more confidence in inflation’s path downward is needed.
Looking ahead, the market rally faces new challenges this week, including a fresh reading on inflation and consumer spending. Approximately 15% of the S&P 500 is set to report earnings, with companies like John Deere, Coinbase, Airbnb, and Shopify headlining the corporate reports.
On Tuesday, investors are awaiting the Consumer Price Index (CPI) for January. Wall Street anticipates an annual gain of 2.9% for the headline CPI, including the price of food and energy, a decrease from the 3.4% headline number in December. On a “core” basis, inflation is expected to have risen 3.7% year-over-year, with monthly core price increases expected to remain unchanged from the previous month.
Among other economic data, a fresh reading on consumer spending in the form of the January retail sales report is set to greet investors on Thursday. Economists expect retail sales to have declined 0.2% in January from the prior month.
Monthly core goods deflation, driven by weak used car prices, is expected, alongside some deceleration in rents inflation but a slight rebound in insurance prices and hotels.
In terms of earnings, traditional automakers Ford and GM surprised investors with positive earnings reports, while Stellantis, the parent company of Chrysler and Fiat, is expected to report its earnings on Thursday, highlighting the continued focus on the automotive sector.
Broadly, earnings have been increasingly positive, with 75% of S&P 500 companies having reported earnings, signaling the benchmark index’s second straight quarter of earnings growth. Analysts see this trend continuing throughout the next two years. The particularly high beat rates in the US are significantly higher than those in other countries, potentially indicating why US stocks are outperforming other markets.
As the week progresses, investors will be focused on a variety of economic data and earnings reports, including those from companies like Airbnb, Coca-Cola, Lyft, and Sony, among others. The continued focus on inflation and consumer spending will be key drivers for the market’s direction, providing insight into the state of the economy and potential future developments.