Stocks rallied to record highs in the past week and the momentum could continue as investors focus on the $1.9 trillion fiscal stimulus package making its way through Congress. A side effect of that stimulus plan has been rising interest rates and talk of rising inflation. Some of the stocks that did best in the past week were those that would do better in an improving economy or in a higher interest rate environment, like financials.
Treasury yields have been boosted by the outlook for better economic growth and the prospect of more U.S. debt, but strategist say so far that is also a positive for stocks.
In fact, some strategists see less chance of a first half stock market correction, including Fundstrat's Tom Lee who wrote he sees a "high probability" that a first half 2021 correction is over because of a sharp drop in the VIX and selling by hedge funds.
There are some big earnings in the week ahead, including rival beverage companies Coke and Pepsi, as well as Walt Disney. CPI inflation data is due Wednesday, and Fed Chairman Jerome Powell also speaks that day in a webinar with the Economics Club of New York.
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