After Federal Reserve Chair Jay Powell’s recent comments on potential interest rate hikes in 2023 caused a decline in the three major stock indices last week, investors are once again turning their attention to the Fed’s next moves. This week, they will closely watch inflation data, consumer confidence reports, and earnings releases from companies like Nike (NKE), Carnival (CCL), Walgreens (WBA), and Rite Aid (RAD).

The highlight of the week’s economic data will be the release of the Personal Consumption Expenditures (PCE) index on Friday, which is the Fed’s preferred inflation indicator. Given Powell’s acknowledgment of higher inflation levels, investors are keen to analyze the data for insights into the central bank’s future policy decisions. The “core” PCE, which excludes food and energy prices, is expected to have risen by 4.7% year-over-year in May, maintaining the same level as April. Inflation above the Fed’s 2% target could impact monetary policy.

Additionally, consumer checks from The Conference Board and the University of Michigan will provide valuable insights into consumer sentiment on Tuesday and Friday, respectively. Housing data, including new home sales and the S&P CoreLogic Case-Shiller U.S. National Home Price index, is also expected during the week.

On the earnings front, Nike’s report will be in the spotlight as it sheds light on the company’s progress in offloading excess inventory and potential challenges it may face. Analysts are particularly interested in inventory levels and gross margin growth, as concerns about inventory headwinds persist. Investors will pay attention to Nike’s report following Foot Locker’s warning about inventory troubles in its recent earnings release.

Last week’s market performance saw a decline, with the Nasdaq Composite experiencing its first weekly loss in eight weeks, and the S&P 500 snapping a five-week winning streak. However, stocks remain up for the month of June overall. The performance in the final week of June will be crucial for investors looking to end the month, quarter, and first half of 2023 on a positive note.

As investors search for new catalysts, they are closely monitoring the AI-driven rally in tech stocks, semiconductors, and other momentum trades. The recent pullback in the market, according to some analysts, was overdue and raises questions about whether it represents a temporary correction or a major shift in market sentiment.

Tom Lee, head of research at Fundstrat, believes that inflation is cooling and that the economy is moving towards an expansion rather than a recession. He expects this trend to become evident in the upcoming PCE and housing data. However, bears in the market point to potential rate hikes, a potential earnings decline in the second half of the year, and concerns of an AI bubble similar to that of 1999.

Investors will closely monitor the release of inflation data, consumer confidence reports, and earnings releases from notable companies like Nike, Carnival, Walgreens, and Rite Aid. They aim to gauge the Federal Reserve’s future policy decisions and assess the overall market sentiment as they close out the month, quarter, and first half of 2023.