Stocks Bounce Back, but CPI and AI Earnings Come Next

Last week’s technology selloff rattled Wall Street. The Nasdaq fell 3.4%, semiconductors dropped 12% on Thursday alone, and worries that a Democratic Congress could slow AI spending and data center construction spread across the market. Stocks moved higher Friday and again Monday, but the question now is whether that can hold.

Fundamentals remain strong, with solid earnings growth, lower valuations (PE at 17.7 vs. 22.0 in Jan), and falling oil prices providing support. However, the markets want proof that companies with massive capex can yield timely returns.

Three Key Catalysts This Week

1. Inflation & the Fed:
Tuesday’s CPI and Friday’s PPI are the week’s main macro tests. Resilient jobs data has revived concerns over Fed interest rate hikes; a hot inflation print would put pressure on high-multiple tech stocks.

2. AI Earnings:
CoreWeave (CRWV) reports on Tuesday, followed by Nebius (NBIS), Cisco (CSCO), and Applied Materials (AMAT) on Thursday. Investors are concerned about data center buildout timelines, financing costs, and forward guidance.

3. Market Breadth & Stabilization:Bargain hunters returned to the market last Friday and early Monday morning, supported by lower oil prices, flat Treasury yields, and global sentiment. A sustainable rally requires broader stock participation and stable Treasury yields.

S&P 500 earnings are up 30% from a year ago while valuations are around 20% lower than in January, so stocks are cheaper relative to profits than they were at the start of the year.

A mild inflation report, steady yields, and reassuring guidance from the AI names could turn the bounce into a real recovery. The economy is in better shape than last week’s selling suggested, and a softer inflation print could take a December rate hike off the table.