Of big interest will be Wal-Mart's earnings Thursday, after Bloomberg news service Friday quoted an email from a mid-level executive saying Wal-Mart's February sales were a "total disaster," the weakest start to a month he'd seen in his seven years with the company. Wal-Mart, in response, said like any organization, it sees internal communications that are not entirely accurate or in context. The report drove Wal-Mart and other retail stocks lower Friday.
(Read More: Leaked Wal-Mart Email Drags Retailers)
"You're looking at a very important company in a very important space, but it doesn't always meant that as one company goes so goes everyone else and so goes retail sales," said LaVorgna.
Economists have been concerned that the 2-percent increase in payroll taxes would hold back consumers, as gasoline prices are also rising.There is also worry that the delay in tax refunds this year could also dampen consumer spending. Gasoline in the past week has jumped to $3.73 per gallon of unleaded regular from $3.58 nationally, according to AAA.
(Read More: Could Delayed Tax Refunds Cause a Spending 'Collapse'?)
"Wal-Mart bears watching for hints that there was a slowdown. I would be hesitant to say the consumer is done. The consumer is very resilient. Vehicle sales have been good ... it looks anecdotally that vehicle sales numbers look to be okay through February," LaVorgna said, adding that data show consumer sentiment is recovering.
Citigroup retail analyst Deborah Weinswig said in a note that a consumer slowdown is not surprising but as Wal-Mart is hurt by the low-end consumer pulling back, it could be helped by the middle-income consumer trading down.
"I certainly think we have to wait until Wal-Mart actually lets us know what the numbers look like," said Art Hogan of Lazard Capital Markets. "I don't think it takes very many bricks to build a bridge to lower consumer sales on the low end and lower consumer sales in general." He said the snowstorm which slammed New England earlier during the month could also have impacted sales since it paralyzed travel for several days.
In the week ahead, "we get a lot of housing data, so the economic-data calendar is richer. We probably start hearing more about whose plans for the sequester are going to work," he said. The sequester is the $85 billion series of automatic spending cuts that kick in on March 1 if Congress does not act.
Europe will also be a factor as investors watch the run-up to the Italian election next weekend. European Central Bank President Mario Draghi also speaks at the European Parliament Economic and Monetary Affairs Committee Monday, when U.S. markets are closed for the President's Day holiday.
As for Italy, the election there is becoming an increasing concern for markets as former Prime Minister Silvio Berlusconi appears to have gained ground. "What's happening at the short end is Italian bonds have been underperforming Spanish bonds. There's a black out period for the polls," said Marc Chandler, head of foreign exchange strategy at Brown Brothers. "Partly, they're flying in the dark, and the problem is he's in favor of tax cuts."
The markets are also watching the aftermath of the G-20, which vowed in a statement over the weekend that countries would not target their currencies. It did not point to Japan which has backed off from previous statements aimed at driving down the yen. The yen traded lower Monday.
"With the meetings out of the way,we expect the jawboning about he currency market to die down," wrote Chandler.
On Monday, Prime Minister Shinzo Abe was quoted on newswires as saying that purchasing foreign bonds was an option for the Bank of Japan. He also was quoted by the Wall Street Journal as saying that if the Bank of Japan failed to hit its policy target of 2 percent rise in inflation, his administration could consider legislative changes.
Slow Motion Market
The S&P 500 gained for a seventh week, but the advance was just 0.1 percent to 1519, and the Dow was down less than 0.1 percent at13,981. The Nasdaq was also lower by less than 0.1 percent, to 3192. But the small-cap Russell 2000 moved in a much bigger way and scored repeated new highs in the past week. It ended the week up 1 percent at 923.
"I think the tendency at the moment is to trade sideways to perhaps biased downward. I think to change that directionally, it's going to need something more macro," said Mark Luschini, chief investment strategist at Janney Montgomery. He said the market could be helped by some positive development on the "sequester" spending cuts, but analysts have been lowering the odds on any serious action by Congress.
The past week was marked by a sudden surge in takeover activity, including the planned $24 billion acquisition of Heinz by Warren Buffett's Berkshire Hathaway and 3G Captial Management. US Air and American Airways also announced their long awaited merger, and Comcast in a surprise move, said it would buy the rest of NBC Universal from General Electric sooner than expected for $16.7 billion. NBC is the parent of CNBC.
"Maybe animal spirits will be released but the fiscal issues are still hovering," Luschini said.
(Read More: Is Buffett Still a Bargain Hunter?)
Stocks involved in the deals moved on the news, as did some stocks in related sectors, like food, but the broader market did not budge.
"I think it's a little bit of a negative that the market is not a little more excited about it," said Laszlo Birinyi, president of Birinyi Associates. "Part of it is companies have so much cash and they're not getting paid to do anything with it."
Birinyi said he sees a chance that the S&P hits 1600 this year, and he remains bullish. "I'd feel better if the market did react a little more aggressively. On the other hand, I'm very pleased with how this market is holding in."
He said the rash of activism in the market is also apositive. "Anytime there's a disturbance that can bring focus to bear on an issue, I think it helps," he said. He said the activity is positive, even if he disagrees with the objections.
Dell's going private deal faces objections from shareholders over price, and Apple too is facing a test. Hedge-fund manager David Einhorn is suing Apple, seeking to block its shareholder vote on a proposal to eliminate the ability to issue preferred stock without investor approval. A hearing in the case is set for Tuesday in Manhattan.
Not So Glittery
Gold took a pounding in the past week, losing 3.4 percent to $1,609.50 per ounce. But it was higher Monday, as Chinese buyers returned from new year's holidays.
"In a way, the same thing is happening with the great rotation," said Chandler, noting investors are taking cash and putting it to work in the equities market. "What they're reducing is cash and some of them think gold is a form of cash and there's money coming from gold, going into the stock market."