The earnings deluge continues and inflation reports are due, but it will be the tone of trade talks in Beijing that could have the biggest impact on markets in the week ahead.
“I think it’s a very big deal, but I think this whole process is one to manage expectations, and the market, I think, is being set up for positive news. I think if some good news comes out next week, it will be a very positive event for the market. If not we could see some sideways volatility,” said Don Townswick, head of equities at global investment management firm Conning.
Earnings will continue to rumble in from names including Cisco Systems, Coca-Cola and Pepsi, as another 60 S&P 500 companies report. Earnings for the fourth quarter have been up about 16 percent, but S&P 500 companies have warned that expectations were too high and now first quarter earnings are likely to show an actual decline.
“Obviously, last year’s earnings were supercharged. This year, what looks like a negative year in terms of earnings growth is relative to last year,” Townswick said. Many strategists point to the massive corporate tax cuts as being a big contributor to the pop in 2018 earnings growth, which reached 23 percent.
Besides earnings, there is some important data, particularly December’s retail sales Friday and CPI consumer inflation Wednesday. Producer inflation is expected on Thursday. The inflation data will be especially important after the Fed indicated, following its January meeting, that it was willing to pause in its rate hiking and that inflation remain subdued.