Stocks start the earnings season at record highs, and now it's up to corporate America to keep the rally going.
About 65 S&P 500 companies release earnings in the first big week of the second-quarter reporting season, with blue chips Johnson & Johnson, American Express, Goldman Sachs, Microsoft and General Electric among them. Profits for the S&P 500 companies are expected to rise more than 8 percent after the first quarter's 15 percent gain, according to Thomson Reuters.
Earnings are expected to carry the ball for market bulls, but there will also be a strong focus on central banks and Washington after a number of big surprises in the past week. For one, Fed Chair Janet Yellen upended a global move higher in interest rates, as well as a turnaround in the dollar, with surprisingly dovish comments on interest rates and inflation.
CPI inflation data came in soft Friday, and that reinforced her caution. That helped boost stocks, but it broke the uptrend in sovereign yields, and now has traders focused on meetings by the Bank of Japan Tuesday and European Central Bank Thursday. Fed officials meet the following week, and they don't have speaking engagements in the week ahead of a meeting.
There was also a stunning revelation from Donald Trump Jr. that he agreed to meet last year during the campaign with a Russian lawyer, who was offering him dirt on Hillary Clinton with the blessing of the Russian government.
Stocks shrugged that off, but traders kept their focus on Washington, as the Senate released a new health-care bill due for a vote in the coming week. That vote could either help boost market expectations that some part of the Trump agenda will be completed, or discourage it.
"The market from a sector perspective is focused on Trump, but the market overall is not focused on Trump. But as long as you're getting good earnings, the market will continue to give Washington time," said Daniel Clifton, head of policy research at Strategas.