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Earnings and taxes will stay in the market's focus next week

  • Retailers join the last major wave of S&P 500 earnings reports in the week ahead, with reports expected from Nordstrom, Macy's and JC Penney.
  • Focus will also remain on the tax bill, as Rep. Kevin Brady says he will offer an amendment Monday.
  • There are few data reports slated for the week ahead, with wholesale trade Thursday and consumer sentiment Friday.

Coming off a monster week for market news, stocks will start the week ahead at new highs, with the focus on the quarter's last big wave of earnings and Congressional wrangling over the tax bill.

Major retailers join S&P 500 companies reporting in the week ahead with earnings expected from Nordstrom, Macy's, Kohl's and JC Penney. Merger news could also dominate, as traders await a $100 billion bid for Qualcomm by Broadcom.

There are just a few economic reports expected, with wholesale trade Thursday and consumer sentiment Friday.

"This [past] week was a massive amount of information— a new Fed chair, a tax plan," said Jonathan Golub, chief U.S. equity strategist at Credit Suisse. "But what I think the real story was this week is the fact you have what is perceived to be a supportive Fed chair and what's perceived to be a supportive tax plan, and the market doesn't seem to give a hoot. The market is up 15 basis points."

President Donald Trump on Thursday named Fed Governor Jerome Powell to replace Janet Yellen when her term as chair ends in February. Powell is viewed as similar to Yellen on monetary policy and more dovish than other members of the Fed.

On the same day Powell was named, the House unrolled its tax package with fewer individual tax brackets and a 20 percent corporate tax.

"I think the real question or issue is why is the market not ripping off the charts on this? Is there something the market is saying we should be paying attention to? I think the market probably says on the Fed chair, maybe it it doesn't matter. Maybe the reason the market is up is not because of the Fed or taxes but because the economy is doing well," Golub said.

The S&P 500 ended the week with a gain of 0.3 percent at 2,587, ending the week at a new high, along with the Dow, up 0.4 percent at 23,539 and Nasdaq up 0.9 at 6,764.

About 73 percent of companies reporting so far have beaten earnings estimates, and earnings growth is better-than-expected at 9.4 percent, according to Thomson Reuters.

The tax plan and the new Fed chair are merely the icing on the cake, according to Golub. "They're not the cake," he said. Rather, Golub said, good earnings, a good economy, low interest rates and a low risk of recession are driving the market.

Golub said retail earnings will be important.

"We may get some information on the health of the consumer in general or the pattern of consumer spending. The spread between brick and mortar and online, you could drive a truck through the differences in the retailers," said Golub. "There may be more clarity....If the economy is good, maybe some of these brick-and-mortar companies could benefit from that."

The week also marks the one-year anniversary of President Donald Trump's election, and the S&P 500 has gained 21 percent in that time. Trump will be in Asia during the coming week, visiting Japan, South Korea, China, Vietnam and the Philippines.

As for the tax plan, there was much skepticism in the bond market that it will get passed this year or in its present form. The bill has already drawn fire because of controversial elements like a new limit on mortgage deductions of $500,000 and an end of some deductions for state and local taxes.

"It's going to be a 2018 event, not a 2017 event. I think the corporate side of tax reform probably hit the nail on the head and should be embraced," said Ward McCarthy, chief financial economist at Jefferies. "The household side is pretty confusing as it relates to SALT [state and local taxes]. I think the big picture macro is that this is probably good for some sectors."

Rep. Kevin Brady, chairman of the House of Representatives tax writing committee said he plans to offer an amendment making improvements to the bill on Monday.

What to Watch

Monday

Earnings: CVS Health, Michael Kors, Mylan, Softbank, Etsy, Priceline, TripAdvisor, Sysco, Booz Allen Hamilton, International Flavors and Frangrances, w TrueCar, Red Robin, FMC, Plains All American

12:10 p.m. New York Fed President William Dudley

2 p.m. Senior loan officer survey

Tuesday

Earnings: Toyota Motor, Tapestry, Valeant Pharma, SeaWorld, Marriott, Blue Buffalo, CBOE Holdings, Virtu Financial, Emerson, Snap, Zillow, Match Group, Dean Foods, Malinckrodt, Hain Celestial, Emerson, Lattice Semiconductor, Fossil, Tanger Factory Outlet, Zynga

10 a.m. JOLTS

1:15 p.m. Fed Vice Chairman Randal Quarles discusses financial regulation at Clearing House annual conference

3 p.m. Consumer credit

3 p.m. Fed Chair Janet Yellen accepts Paul H. Douglas Award for Ethics in Government

Wednesday

Earnings: Humana, Royal Ahold, Wendy's, Regeneron, Encana, IAC/Interactive, Valvoline, Monster Beverage, Flower Foods, Energen, Hostess Brands, MGM Resorts, Sealed Air, Wolverine Worldwide, Twilio, MGM Growth, Square, Nissan

Thursday

Earnings: AstraZeneca, Siemens, Nvidia, Disney, News Corp, Hertz Global, TransCanada, Macy's, Nordstrom, Johnson Controls, Kohl's, Brookfield Asset Management, Office Depot, Time Inc, Adidas, Camping World, Azul, Redfin

8:30 a.m. Initial claims

10 a.m. Wholesale trade

Friday

Earnings: JC Penney, Allianz, Nippon Telegraph, Arcelor Mittal

10:00 a.m. Consumer sentiment

2:00 p.m. Federal budget

WATCH: Europe opens lower ahead of earnings, econ data