Super week ahead: US retail sales, employment report and CPI

The beginning of the year was marked by increased uncertainty regarding the direction of monetary policy. While the underlying economic momentum has remained moderate, the "last mile" of inflation has proven to be more persistent than expected. This has brought nervousness to the markets: investors are now demanding higher returns for equity risk, as the likelihood of a "higher for longer" interest rate environment has once again come into the discussion.

The first major data release of the week from the US comes on Tuesday in the form of retail sales numbers. Consumer demand has been the engine of the US economy, but rising interest rates are starting to reduce into households' purchasing power. Stronger-than-expectednumbers would strengthen the view of the economy's sustainability, but alsol give the Fed room to keep interest rates high. Converserly, weak numbers would raise concerns about a recession, which could particularly affect cyclical stocks.

The Non-Farm Payroll report is due on Wednesday. Labor market data is currently a double-edged sword: too strong data fuels fears of accelerating wage inflation, while too weak data raises concerns about a sudden slowdown in the economy. If average hourly earnings rise faster than expected, it could also be a direct signal to the Fed to maintain a tight monetary policy.

The week culminates with the release of the Consumer Price Index (CPI) numbers on Friday. Historically, the “last mile” for inflation to reach the 2% target has proven historically difficult, and the resilience of service sector prices has kept investors on their toes. If Friday’s numbers show inflation accelerating or even stalling, markets will have to adjust expectations for a rate cut in 2026. This scenario would likely push up the 10-year U.S. Treasury yield and cause widespread selling pressure in equity markets just before the weekend. Conversely, a lower-than-expected figure could release pent-up buying pressure and trigger a relief rally.

When looking at the S&P 500 and NASDAQ-100, there is also a clear difference between them from a technical perspective. The markets have seen some moderate declines in the past few weeks, but the S&P 500 index has nevertheless outperformed the NASDAQ-100 index.

Looking at the bigger picture, the S&P 500 has managed to remain above the shorter-term moving averages (EMA25: yellow, SMA50: blue) on the daily chart. However, the price briefly moved below these averages last week. The price rose strongly on Friday, returning above them. The technical picture of the index has not changed much in the long  term, although there has been a lot of movement on a daily level. If the price continues to decline and the price falls below the shorter-term moving averages (EMA25 and SMA50) again, it could raise questions about a possible trend reversal in the market.

The NASDAQ-100 index has underperformed the S&P 500 index for some time. Last week, its price fell below the shorter-term moving averages (EMA25, represented by yellow and SMA50 represented by blue) on the daily chart. However, as with the S&P 500, the price was unable to return above these averages after Friday’s uptrend. The EMA25 moving average also fell below the SMA50 moving average on the daily chart during the rest of the week, making  the technical outlook for  of the index weakerFor the technical outlook to improve, the price would need to riseabove the shorter-term moving averages on the chart. This would make the technical outlook more positive. If the price remains below these averages, the technical picture will remain weak in the short term.

The market is currently at a critical inflection point, and the coming week will likely act as a catalyst for the next major move. The technical divergence between the S&P 500 and NASDAQ-100 is a warning sign for investors to watch: weakness in technology stocks is obscuring the broader market’s relative stability.