A man wearing a protective face mask walks past 14 Wall Street in New York’s financial district on November 19, 2020.

Shannon Stapleton | Reuters

Earnings reporting season kicks off next week and is expected to be a positive catalyst that could propel stocks higher for the time being.

The Dow and S&P 500 started the week at record highs after a strong rally on Friday.

The week ahead is jam-packed with Federal Reserve speakers and key data, including a highly anticipated inflation reading on Tuesday, when the consumer price index is released. Fed Chairman Jerome Powell starts another busy week of Fed appearances with a “60 Minutes” interview on Sunday evening. He will also speak at an Economic Club of Washington event on Wednesday.

Powell further reiterated in comments last week that the Fed will maintain its simple policy for a long time and that any occurrence of inflation should be temporary. Producer price inflation data, which turned out higher than expected on Friday, made the consumer price index release on Tuesday all the more important. The PPI increased 1%, twice as much as expected.

Kevin Cummins, chief US economist at NatWest Markets, expects core CPI to increase 0.2% or 1.5% year-over-year in March, but headline inflation is likely to increase 0.5% or 2.5% year-over-year climb. Cummins said March marked the start of a period when inflation could appear higher only based on comparison with the low levels last year when the economy closed.

“I think the Fed has already moved on,” said Cummins. He expects the CPI to peak at 3.6% in May, but then to calm down in the summer.

The other key piece of data for the week ahead is the March retail sales report, which Cummins said could see a 10% gain. The Dow Jones consensus forecast is up 5.6% after a 3% decline in February.

Cummins said sales in March should be boosted by the $ 1,400 stimulus checks sent to individuals that reached bank accounts as of mid-March. A larger part of the economy has also opened up as more and more people are being vaccinated.

“The back end of the month should be very strong,” he said. “If you look at car sales, it was the highest level in four years. It seems like restaurants with outdoor seating are getting busier.”

Earning Season

But it may be the earnings season that is the real criterion for the economy.

“It’s not what they report,” said James Paulsen, chief investment strategist at Leuthold Group. “For the first time we will hear more and more companies actually commenting on the future. Are they going to upgrade some of their prospects or not? That really is the key.”

The big banks start reporting on Wednesday with JPMorgan, Goldman Sachs and Wells Fargo. Bank of America and Citigroup report on Thursday. Morgan Stanley reports Friday. PepsiCo and Delta Airlines are also among the first to report.

“The consensus for the first quarter is that earnings should increase by around 22%. We have a simple year-over-year balance sheet. That number could be closer to 30%,” said Brian Rauscher, head of global portfolio strategy at Fundstrat.

Rauscher expects most of the earnings blows to be in cyclical sectors such as consumer staples, finance and commodities, all of which benefit from the reopening of the economy.

“I think the winning season will be constructive and good enough to keep the market higher,” he said.

Based on estimates and early reports, Refinitiv now expects first quarter earnings growth of 25%. Companies have so far exceeded estimates by a pace of 81%. Financial sector earnings are expected to grow 76%. The consumer staples sector was hit hard by the stalemate a year ago, and earnings should rebound by 98%, according to Refinitiv.

“I think we will see that the operational leverage for these companies is really underestimated. Profits will return faster than revenues,” said Rauscher. “Corporate America has done a really good job over the past year streamlining its operations, cost structures, and everything else. Revenues could come back by 50% and profits by 100%.”

Major stock market indices were higher for the past week, but small caps lagged as the Russell 2000 lost ground. The Dow rose nearly 2% for the week, ending at a record 33,800, while the S&P 500 rose 2.7% to a record 4,128. The Nasdaq led the way, up 3.1% to 13,900. The Russell fell half a percent to 2,243.

The benchmark 10-year government bond yield remained in the mid-zone of its most recent range. On Friday afternoon it was 1.65%, well below its most recent high of 1.77%.

Calendar for the week ahead

Monday

1:00 pm Eric Rosengren, President of the Boston Fed, at the Newton-Needham Regional Chamber webinar

2 p.m. federal budget

Tuesday

Result: Fastenal

6:00 am NFIB Small Business Survey

8:30 a.m. CPI

12:00 p.m. Fed Race and Economy Webinar Event – Raphael Bostic, President of the Atlanta Fed, Eric Rosengren, President of the Kansas City Fed, Ester George, President of the Minneapolis Fed, Neel Kashkari, President of the San Fed Francisco, Mary Daly

12:00 noon Patrick Harker, President of the US Federal Reserve in Philadelphia, at the Delaware Chamber of Commerce webinar

Wednesday

Merits: JP Morgan Chase, Goldman Sachs, Wells Fargo, Bed Bath and beyond, Infosys, First Republic Bank

8:30 a.m. import prices

9:15 am Rob Kaplan, President of the Dallas Fed, at the Woodlands Chamber webinar

12:00 p.m. Fed Chairman Jerome Powell at the Economic Club of Washington webinar

2.00 p.m. Beige book

2:30 pm John Williams, President of the New York Fed, at the Rutgers Finance Society webinar

3:45 pm Richard Clarida, vice chairman of the Fed, at the Shadow Open Market Committee meeting

4:00 p.m. Raphael Bostic, Atlanta Fed President, in the Georgia Tech School of Architecture webinar

Thursday

Result: Bank of America, Citigroup, UnitedHealth, PepsiCo, BlackRock, Alcoa, PPG Industries, US-Bancorp, Charles Schwab, Delta Air Lines, Rite Aid, Wipro, Taiwan Semiconductor, Truist Financial, SunTrust

8:30 a.m. first claims

8:30 a.m. retail sale

8:30 a.m. Philadelphia Fed poll

8:30 a.m. Empire State Manufacture

9:15 a.m. industrial production

10:00 am business inventories

10:00 am NAHB house builder atmosphere

11:30 am Raphael Bostic, Atlanta Fed President, interview with Atlantic Webinar

2:00 pm Mary Daly, President of San Francisco, at the Money Marketeers webinar

4:00 p.m. TIC data

4:00 p.m. Loretta Mester, President of the Cleveland Fed, at the Swarthmore College webinar

Friday

Merits: Morgan Stanley, PNC Financial, South Kansas City, Bank of NY Mellon, Citizens Financial, Ally Financial, State Street

8:30 a.m. Survey among managing directors

8:30 a.m. Housing construction begins

10:00 am consumer mood