The stock market continued its recovery last week, building on momentum from the Federal Reserve's policy decision as investors gained confidence that the central bank has successfully navigated conflicting signals on inflation and economic growth. The S&P 500 ($SPX) (SPY) maintained its position above key technical levels despite some volatility, while traders balanced optimism from strong corporate earnings against ongoing geopolitical uncertainties and anticipation of crucial inflation data ahead.

Here are 5 things to watch this week in the Market.

Critical Inflation Reading

Tuesday's Consumer Price Index (CPI) at 8:30am represents this week's most consequential economic release. Following persistent inflation signals in recent reports, this reading will be heavily scrutinized for any signs of moderating price pressures. The market will focus not only on the headline figure but particularly on core inflation excluding food and energy, which has proven stickier than expected throughout early 2025. With the Fed signaling continued caution about inflation risks at last week's policy meeting, this data could significantly influence expectations for the timing and magnitude of potential rate cuts later this year. Rate-sensitive sectors including technology, utilities, and financials could see pronounced reactions based on this report, which comes at a critical juncture for market sentiment regarding the inflation trajectory.

Retail Sales Health Check

Thursday's Retail Sales report at 8:30am will provide crucial insights into consumer spending momentum as summer approaches. With consumer resilience remaining a primary driver of economic growth, this data takes on heightened importance for assessing whether households are maintaining spending despite elevated inflation and interest rate pressures. The report's composition across discretionary and non-discretionary categories will help identify evolving consumption patterns, while the control group figure preferred by economists offers perspective on underlying demand strength. Companies sensitive to consumer behavior, particularly those reporting earnings this week including Walmart (WMT) and Alibaba (BABA), could see notable reactions based on how these broader spending trends align with their results and guidance.

Powell's Economic Assessment

Fed Chair Jerome Powell's speech Thursday at 8:40am will be closely monitored for insights into the central bank's current thinking on economic conditions and monetary policy direction. Following last week's FOMC decision and updated projections, Powell's latest remarks could provide additional color on how the committee is evaluating mixed signals from inflation and growth indicators. With the speech timed shortly after the retail sales data and Thursday's market open, his comments could amplify or moderate market reactions to the fresh economic data. Investors will particularly focus on any evolution in Powell's tone regarding inflation persistence, labor market conditions, and the appropriate timeline for potential policy adjustments. The coincidental timing with important economic releases and earnings reports creates potential for significant market volatility across both growth and value sectors.

US-China Trade Developments

Markets remain highly sensitive to evolving US-China trade discussions, with reports suggesting potential progress toward reducing recently implemented tariffs. Any concrete announcements on tariff structures or negotiation breakthroughs could trigger significant sector rotations, particularly impacting companies with substantial China exposure or global supply chain dependencies. Industries including technology hardware, semiconductors, agriculture, and industrial equipment manufacturers could experience pronounced moves based on policy developments. The scheduled negotiation round comes at a crucial juncture following months of elevated tensions and could signal whether a more constructive bilateral economic relationship is emerging. Earnings from multinational companies this week, including Cisco (CSCO) and Deere (DE), will provide context on how businesses are navigating the current trade environment and adapting strategies amid policy uncertainty.

Late-Stage Earnings Focus

This week brings reports from several bellwether companies across key sectors, offering important insights as earnings season approaches its conclusion. Cisco (CSCO) reports Wednesday, providing perspective on enterprise technology spending and networking infrastructure demand. Thursday features results from retail giant Walmart (WMT), Chinese e-commerce leader Alibaba (BABA), and agricultural equipment manufacturer Deere (DE). This diverse group offers insights into global consumer health, cross-border commerce trends, and agricultural investment activity. Management commentary on pricing power, inventory conditions, and forward guidance will be particularly important for assessing business confidence amid ongoing inflation and policy uncertainties. With overall Q1 earnings having generally exceeded lowered expectations, these late-cycle reports could influence whether the market's recent constructive tone continues into the summer months.

Best of luck this week and don't forget to check out my daily options article.