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Big box retailers' earnings and minutes from the last Fed meeting are highlights, but the focus will stay squarely on the White House, after just a month of President Donald Trump's whirlwind tenure as president.
Stocks in the past week rallied hard early in the week, and the gains in the and Dow were among the best of the year.
Fed Chair Janet Yellen, in testimony to Congress, made it clear that the Fed hopes to hike rates in the near future, and stronger consumer, Philly Fed manufacturing and inflation data in the past week all supported that case. So the release of minutes from the Fed's Feb. 1 meeting this coming Wednesday will be important in terms of signaling the broader view of Fed officials.
Economists believe the Fed will next raise rates in June, but the odds for March and May moved higher after Yellen's comments and the strong inflation and retail sales data.
"The data flow this week was almost phenomenally good, almost every day. The reports are unstoppable," said James Paulsen, chief investment strategist at Wells Capital.
That's helping drive the stock market and should continue to, for now.
"I think there's still more upside room before we stop for any kind of significant pullback," he said.
The coming week's data includes existing home sales Wednesday, and new home sales and consumer sentiment on Friday.
However, Paulsen said the focus will also be largely on the White House, as investors monitor economic reports and also some earnings.
"We're long in the tooth in this earnings season. I think it's pretty well defined. There could be some interest in the big box stores as to what they're saying about the year. How do they feel this is shaping up? How do they see the trends? Is this consumer confidence translating into sales?" said Paulsen.
Traders will also be watching the earnings from Wal-Mart, Home Depot and Macy's on Tuesday, and Kohl's Thursday, among others. They will also be listening for what company managements say about the tax debate in Washington. Retail CEOs met with President Donald Trump in the past week to voice their concern about the border-adjusted tax that is part of the House plan on tax reform. It would contribute a big part of the revenues for the plan, which would take the corporate tax rate to 20 percent from 35 percent.
That border-adjusted tax in the House plan appeared to be running into more opposition in the Senate, so traders will be watching for any developments. Trump has not yet presented his plan and it's unclear where he stands on the border-adjusted tax, which he has called "complicated."
"It'll be all about Washington and this tax reform, and that's what's been driving things for awhile," said Peter Boockvar, chief market analyst at The Lindsey Group.
Boockvar said he believes the White House is coming up with a Plan A and Plan B, and Trump is expected to unveil his plan within the next two weeks. "They have to come up with a plan B or this market is going to collapse," said Boockvar.
The so-called border-adjusted tax would put a 20 percent tax on imports into the U.S. but not tax exports. Proponents say the dollar would adjust by rising sharply, maybe 25 percent, and that would head off any inflation from a new tax on goods. Exporters like General Electric and Boeing favor the plan. But opponents say the dollar may not adjust and that would result in retailers and other big importers being saddled with new costs that would end up hitting consumers.
The border-adjusted tax is important because without it, it would be difficult for Congress to cut taxes to the 20 percent rate without adding to the deficit. Without the border adjustment, analysts expect the corporate tax rate could still fall to 25 percent, but that would limit the desired impact on the economy, since large corporations in the S&P 500 already pay an average 25 percent, well below the 35 percent rate.
"There's a lot of people in the investment community that don't think that will go through, and there's a lot of things in Trump's proposals that should not come through because they're potentially damaging. The thing to come through should be the tax cuts, but we don't need tariffs," said Paulsen.
Paulsen said the stock market responded well to Yellen's hawkishness. "It's a good thing. People are talking about how it's building confidence. … Until that mindset changes, good news is good news. Higher interest rates and inflation right now are good news to markets," he said.
Treasury yields in the past week moved in a fairly wide range, with the 10-year note yield reaching around 2.52 percent before drifting back to 2.42 percent late Friday. The S&P 500 rose 1.5 percent for the week, ending at 2,351 and the Dow was up 1.7 percent, ending the week at 20,624. Nasdaq closed the week at a record 5,838, up 1.8 percent.
The Fed minutes could confirm Yellen's hawkish tone and signal that the Fed is ready to raise interest rates, but not signal when.
"With the exception of the wage data in January, the data is there [for a hike]. The question is what are the perimeters on the uncertainty?" said Diane Swonk, CEO of DS Economics. She does see June as most likely for a hike because the Fed may see risk in upcoming events, such as the French election in April. Odds have improved for French nationalist candidate Marine Le Pen, who is outspoken against the euro.
Swonk said there is also uncertainty about President Donald Trump's stimulus plans in terms of what they will look like and what will tax reform be like. She said there are also questions about whether he would back protectionist policies, and that could have been discussed by the Fed and show up in its meeting minutes.
"You have a lot of things that could roil financial markets in a major way and a lot of uncertainty," she said. "The data is saying we should [hike rates], but there's an argument for a potential pause."
What to Watch
U.S. markets closed
Earnings: Wal-Mart, Home Depot, Medtronic, Macy's, Advance Auto Parts, Genuine Parts, Cracker Barrel, Lumber Liquidators, First Solar, Papa John's, Extra Space Storage, Newmont Mining, FirstEnergy, Morningstar, Newfield Exploration
8:30 a.m. Minneapolis Fed President Neel Kashkari
8:45 a.m. Manufacturing PM
12:00 p.m. Philadelphia Fed President Patrick Harker
1:00 p.m. 2-year note auction
Earnings: Tesla Motors, L Brands, HP, Cheesecake Factory, Boston Beer, Fitbit, Iamgold, Bayer, TJX Cos, Host Hotels, Norwegian Cruise Lines, Toll Brothers, Garmin, Chico's FAS, Southern Co, Six Flags
10:00 a.m. Existing home sales
1:00 p.m. 5-year note auction
2:00 p.m. FOMC minutes
Earnings: Barclays, Kohl's, Gap, Nordstrom, Chesapeake Energy, Hormel Foods, Seadrill, Cinemark, AMC Networks, Kate Spade, Baidu, Splunk Imax, Intuit, Axa, NovoCure, Pinnacle Foods, Wayfair, Canadian Imperial Bank
8:30 a.m. Initial claims
8:30 a.m. Atlanta Fed President Dennis Lockhart
9:00 a.m. FHFA home prices
9:45 a.m. Service PMI
1:00 p.m. 7-year note auction
Earnings: JC Penney, Royal Bank of Canada, Foot Locker, Public Service, Rowan Cos
10:00 a.m. New home sales
10:00 a.m. Consumer sentiment