What do you know this week?

A massive earnings report from AI darling Nvidia (NVDA) sent shares to record highs last week. New inflation data will test this rise in the coming days.

The S&P 500 (^GSPC) and Dow Jones (^DJI) finished the week up about 1% while the Nasdaq Composite (^IXIC) added about 0.6%. The Standard & Poor's and Dow Jones indices closed at record levels on Friday.

The biggest challenge for markets next week is likely to come from the latest reading of the Personal Consumption Expenditures (PCE) index, the Federal Reserve's preferred measure of inflation, on Thursday. A look at consumer confidence and updates regarding the manufacturing sector will also be in focus during the week.

Quarterly reports are also available from Salesforce (CRM), Lowe's (LOW), Macy's (M), Okta (OKTA), and Best Buy (BBY).

Check price

The last time an inflation report was released before the opening bell, a higher-than-expected Consumer Price Index (CPI) report rocked markets and sparked a sell-off in stocks.

It could happen again. The latest inflation reading is scheduled for Thursday. Economists expect 'underlying' annual growth in personal consumption expenditures – which excludes the volatile categories of food and energy By 2.4% in January. During the previous month, economists expect the “core” PCE rate to reach 0.4%.

A monthly price increase of 0.4% would be a marked increase from the 0.2% seen in the previous month, and speaks to growing concerns that inflation may be firmer than initially expected. Notably, this would bring the six-month and three-month annualized inflation numbers, which have been below the Fed's 2% target, back to above 2%, according to the economic team at Bank of America.

Ellen Zentner, chief US economist at Morgan Stanley, noted that higher monthly price increases would set the stage for a “bumpy” inflation picture over the next few months. Markets are now pricing in three rate cuts for 2024, in line with the Fed's latest forecast and down from the previous consensus of six cuts seen in December, according to Bloomberg data.

The story continues

The consumer comes into focus

The fourth-quarter earnings season is slowing down, but there are still a large number of companies ready to report their results, including many in the retail sector. Next week will take a closer look at the consumer with results from Macy's, Best Buy, TJX (TJX) and others.

For Simeon Siegel, senior retail analyst at BMO Capital Markets, the key question remains whether consumer spending is losing steam. At this point, he told Yahoo Finance Live, the quarterly results showed that Americans were still spending on discretionary goods.

“There is a perception that it is due to inflation [consumer] “The basic items that people aren't buying are discretionary. But I don't see that in the results,” Siegel said.

Have we reached market “euphoria”?

with All three major averages are trading near record highs and earnings from AI powerhouse Nvidia are sending an entire sector into rally mode, and perhaps the biggest question for investors is whether the market has peaked.

Citi's US equity strategy team says no.

“Now is not the time to panic as sentiment has not reached euphoria,” Citi managing director Scott Krohnert wrote in a weekly note to clients.

Kronert's team uses an indicator called the Lefkovich index, which takes into account investors' short positions and leverage, among other factors, to determine market sentiment. The current reading is 0.33, lower than the 0.38 that indicates markets are entering a state of euphoria, or an extended peak. As shown in the chart below, previous periods in which the market extends into euphoria territory are often followed by market pullbacks.

Krohnert acknowledges that strong market momentum could push the S&P 500 above the company's year-end target of 5,100 in the short term, but in the long term, more tailwinds will be needed to keep the market pressure higher.

“In the longer term, more upside earnings, and macro tailwinds, such as lower interest rates, may be needed for sustainable growth. [S&P 500] “The indicator is bullish,” Kronert wrote.

Weekly calendar

Monday

Economic data: Dallas Fed Manufacturing Activity, February (previously -27.4); New Home Sales, January (annual expected 684,000, previously 664,000); New Home Sales, MoM, January (+3% expected, +8% previously)

Profits: Domino's Pizza (DPZ), Freshpet (FRPT), Hims & Hers (HIMS), iRobot (IRBT), Workday (WDAY), Zoom (ZM)

Tuesday

Economic data: Conference Board Consumer Confidence Index, February (114.8 expected, 114.8 previous); S&P CoreLogic Case-Shiller, 20-City Composite Home Price Index, Monthly, December (+0.15% previously); S&P CoreLogic Case-Shiller 20-City Composite Home Price Index, YoY, December (+5.4% previously)

Profits: AutoZone (AZO), Beyond Meat (BYND), Cava (CAVA), Cracker Barrel (CBRL), Devon Energy (DVN), First Solar (FSLR), Lowe's (LOW), Macy's (M), Norwegian Cruise Line (NCLH) ) )

Wednesday

Economic data: MBA Mortgage Applications, Week Ending February. 23 (previously -10.6%); Wholesale Inventories MoM, January (+0.4% previously); Q4 GDP, 2nd Estimate (+3.3% annual rate expected, +3.3% previously); Q4 Personal Consumption, 2nd Estimate (+2.7% y/y expected; +2.8% previously)

Profits: Advanced Auto Parts (AAP), AMC (AMC), Baidu (BIDU), C3.ai (AI), Icahn Enterprises (IEP), TJX Enterprises (TJX), Marathon Digital Holdings (MARA), Novavax (NVAX), Okta (OKTA), Paramount Global (PARA), Salesforce (CRM), Snowflake (SNOW), and Weight Watchers (WW).

Thursday

Economic data: Initial jobless claims, week ending February. 24 (previously 201,000); Personal Income, Monthly, January (+0.5% expected, +0.3% previously); Personal Spending, Monthly, January (+0.2% expected, +0.7% previously); PCE Inflation, MoM, January (+0.3% expected, +0.2% previously); Personal Consumption Expenditure Inflation, YoY, January (+2.4% expected, +2.6% previously); “Core” PCE, MoM, January (+0.4% expected, +0.2% previously); “Core” PCE, YoY, January (+2.8% expected; +2.9% previously)

Profits: Anheuser-Busch (BUD), Bath & Body Works (BBWI), Best Buy (BBY), Birkenstock (BIRK), Celsius (CELH), Dell (DELL), Fisker (FSR), Hewlett-Packard Enterprises (HPE), Six Flags (SIX), Soundhound (SOUN), Zscaler (ZS)

Friday

Economic news: S&P Global US Manufacturing PMI, final February (previously 51.5); ISM Manufacturing Index, February (49.2 expected, previous 49.1); ISM Paid Rates, February (previously 52.9); University of Michigan Consumer Confidence, February Final (79.6 expected, 79.6 previous)

Profits: FuboTV (FUBO), Power Plug (PLUG)

Josh Schaeffer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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