Coming off a relatively staid past week in the markets, investors step into a packed five-day stretch as second quarter earnings kick off in force, with a healthy selection of economic data releases on the calendar to boot.

S&P 500 (^GSPC) closed out Friday up 0.4% for a gain of 1.2% on the week. The Dow gained 0.3% on Friday but still closed the week on a loss of 0.5%. The Nasdaq picked up 0.3% on Friday to close the week up 1.7%.

After a slow trickle of mostly minor earnings reports throughout the last month, the big banks unofficially kick off the earnings season this week.

JPMorgan Chase (JPM), Goldman Sachs (GS), Bank of America (BAC), Wells Fargo (WFC), and Citibank (C) all report on Tuesday, followed by Morgan Stanley (MS) and fellow financial services giant BlackRock (BLK) on Wednesday.

Other names to watch include pharmaceutical leader Johnson & Johnson (JNJ), industrial giant Kinder Morgan (KMI), and airline leader United Airlines (UAL) on Wednesday, followed by AI bellwether Taiwan Semiconductor Manufacturing Company (TSM), tech bastion Netflix (NFLX), and healthcare leader UnitedHealth (UNH) on Thursday.

On the economic data front, Consumer Price Index data on Tuesday and Producer Price Index data on Wednesday are set to give investors a slate of readings on the state of US inflation, and the University of Michigan’s bimonthly vibe check on consumer sentiment comes out Friday.

Investors really want to see the money

After a blowout first quarter earnings season that exceeded expectations throughout Wall Street and Main Street alike, investors are looking for another standout set of results — and a return on the AI investment.

This means a high bar to clear for Q2.

LPL Financial’s chief equity strategist Jeffrey Buchbinder noted that margins will be “key to potentially keeping up this torrid pace of earnings growth as corporate America seeks out AI productivity gains.”

Margins need to expand “enough to convert low-teens revenue growth into at least double that pace of earnings growth,” Buchbinder wrote, adding that this means the AI trade will have to do a lot of “heavy lifting.”

Specifically, Buchbinder said chip leaders Micron and Nvidia are expected to drive 40% of overall S&P 500 earnings growth, while AI infrastructure stocks are expected to contribute roughly 60%. And outside of the wider tech sector, only energy is expected to contribute more than one point of EPS growth.

The first test for the S&P 500, however, will be the financial services sector, with banks expected to put another set of booming earnings on the back of a mega year for IPOs and trading volumes.

Two crucial readings on inflation

Will June finally be the month that US inflation begins to cool off? Economists actually say maybe, despite it all.

When the Bureau of Labor Statistics releases its monthly Consumer Price Index figures on Tuesday, economists are expecting to see the index drop 0.1% month-on-month after May’s 0.5% increase.

Similarly, Producer Price Index data out on Wednesday, measuring wholesale inflation, is expected to show a monthly slowdown of 0.1% after a gain of 1.1% in May.

Year-on-year measures for both headline CPI and PPI are expected to rise by 3.8% and 6.2%, respectively. Not great. But those figures will show slower growth than May’s yearly gains of 4.2% on headline CPI and 6.5% on headline PPI. The critical “core” CPI reading, stripping out food and energy prices, is also expected to show slower yearly growth.

For investors, the figures will provide a crucial reading on the likelihood and timing of potential rate hikes to come from the Fed as it struggles to reach its 2% inflation target.

Even as the market has fully priced in one quarter-point hike by the December meeting, per Bloomberg data, economists remain widely split. Minutes from the June Federal Reserve meeting, Kevin Warsh’s first as chairman, showed that “almost all” participants were willing to hold or ease policy if inflation slowed down, while “almost all” members leaned toward policy firming if inflation proved frustrating.

“While Kevin Warsh reiterated [that] the Federal Reserve remains fully committed to its 2% inflation target, his continued refusal to provide explicit forward guidance means markets remain highly data dependent,” Capital.com analyst Daniela Hathorn wrote in a recent note to clients.

Economic and earnings calendar

Monday

Economic data: No notable economic data.

Earnings calendar: FB Financial Corporation (FBK)

Tuesday

Economic data: CPI, month-on-month, June (-0.1% expected, +0.5% previously); Core CPI, month-on-month, June (+0.2% expected, +0.2% previously); CPI, year-on-year, June (+3.8% expected, +4.2% previously); Core CPI, year-on-year, June (+2.8% expected, +2.9% previously); Real average weekly earnings, year-on-year, June (-0.5% previously); Real average hour earnings, year-on-year, June (-0.8% previously); ADP weekly employment change, week ended June 27 (+21,000 previously); NFIB small business optimism, June (95.5 expected, 95.3 previously)

Earnings calendar: JPMorgan Chase (JPM), Bank of America (BAC), Goldman Sachs (GS), Wells Fargo (WFC), Citigroup (C), Fastenal Company (FAST)

Wednesday

Economic data: PPI final demand, month-on-month, June (-0.1% expected, +1.1% previously); PPI ex food and energy, month-on-month, June (+0.4% expected, +0.4% previously); PPI final demand, year-on-year, June (+6.2% expected, +6.5% previously); PPI ex food and energy, year-on-year, June (+5.2% expected, +4.9% previously); Empire manufacturing, July (8.6 expected, 5.7 previously); MBA mortgage applications, week ended July 10 (-2.2% previously); Fed Beige Book

Earnings calendar: ASML Holding N.V. (ASML), Johnson & Johnson (JNJ), Morgan Stanley (MS), BlackRock (BLK), The Progressive Corporation (PGR), Bank of New York Mellon (BNY), PNC Financial Services (PNC), Elevance Health (ELV), Kinder Morgan (KMI), Cintas Corporation (CTAS), United Airlines Holdings (UAL), M&T Bank Corporation (MTB), J.B. Hunt Transport Services (JBHT), First Horizon Corporation (FHN), ConAgra Brands (CAG)

Thursday

Economic data: New York Fed services business activity, July (-10.1 previously); Philadelphia Fed business outlook, July (15 expected, 10.3 previously); Retail sales advance, month-on-month, June (+0.3% expected, +0.9% previously); Retail sales ex auto, month-on-month, June (-0.1% expected, +0.8% previously); Initial jobless claims, week ended July 11 (215,000 previously); Continuing claims, week ended July 4 (1.814 million previously); NAHB housing market index, July (35 expected, 35 previously); Business inventories, May (+0.3% expected, +0.5% previously)

Earnings calendar: Taiwan Semiconductor Manufacturing Company (TSM), UnitedHealth Group (UNH), GE Aerospace (GE), Netflix (NFLX), Abbott Laboratories (ABT), Intuitive Surgical (ISRG), Prologis (PLD), U.S. Bancorp (USB), State Street Corporation (STT), Citizens Financial Group (CFG), Wipro (WIT), Alcoa Corporation (AA), Vista Energy, S.A.B. de C.V. (VIST)

Friday

Economic data: Import price index, year-on-year, June (+6.7% previously); Export price index, year-on-year, June (+11.2% previously); Housing starts, month-on-month, June (+13% expected, -15.4% previously); Building permits, month-on-month, June preliminary meeting (-0.7% expected, -0.9% previously); Industrial production, month-on-month, June (+0.2% expected, +0.1% previously); Manufacturing production, month-on-month, June (+0.2% expected, +0% previously); U. Mich. sentiment, July preliminary reading (51.3 expected, 49.5 previously); U. Mich. current conditions, July preliminary reading (48.5 expected, 47.7 previously); U. Mich. expectations, July preliminary reading (52 expected, 50.7 previously); U. Mich. 1-year inflation, July preliminary reading (+4.6% previously); U. Mich. 5-10 year inflation, July preliminary reading (+3.3% previously)

Earnings calendar: The Travelers Companies (TRV), Truist Financial Corporation (TFC), Fifth Third Bancorp (FITB), Danske Bank A/S (DSN.F), Autliv (ALV)

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