As the market now enters earnings season, investors are likely to shift their focus from recessionary fears and interest rate hikes to more concrete data-points showing how companies are actually doing.

Stocks have been volatile over the past week, as the three major indexes posted sharp gains Friday, and worries about a full 100 basis point rate hike at the next FOMC meeting swelled and then faded. But still, overall stocks were down for the week, as the S&P 500 dropped almost 1% to 3863.16.

After the CPI report came in showing a 9.1% rate of inflation for the year in June, investors began to worry the Fed might respond at the July 26-27 meeting with a 100 basis point increase to the Fed funds rate, instead of the widely expected 0.75%, or 75 basis point rate hike. However as reports came in of a 1% gain in June retail sales, data on consumer inflation expectations came in better than expected, and Fed officials took a lighter, more reassuring tone, those fears abated.

Art Hogan, chief market strategist at National Securities said, “It really was a great study in mob psychology. We went into the week with a 92% chance it was a 75 basis point hike, and we exited Wednesday with an 82% chance it was going to be 100 basis points.” By Friday, analysts were saying there was only a 20% chance of a 100 basis point increase priced into the market.

Now as we enter earnings season and a diverse group of companies prepare to provide hard data showing just how well they have been doing, investors are poised to be flooded with a whole new range of data points. Monday will see more big banks report, with Bank of America and Goldman Sachs poised to come in. On Tuesday, Netflix, Johnson and Johnson, and Lockheed Martin will report. Then on Wednesday, Tesla and United Airlines will issue their results. AT&T, Travelers, and Union Pacific will post Thursday, before American Express and Verizon issue their reports on Friday.

There will also be some important data reports coming out, mostly relating to housing. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index will report on Monday. Housing Starts will hit Tuesday, and then existing home sales will come out Wednesday. The Philadelphia Fed Manufacturing Survey comes out Thursday, and then both the manufacturing and services PMI will be released on Friday.

Quincy Krosby, chief equity strategist at LPL Financial said, “Every data point matters and also what companies are saying. Next week… it’s a much broader picture in terms of earnings and the economy. If there are negative revisions and mounting concerns from the guidance, I think then you are going to see questions as to how the Fed is going to interpret that…The other point is whether or not the market can build off today’s rally.”

There is some expectation these reports will contain disappointments, and downward revisions, due to the challenges posed by inflation, supply chain issues, labor and staffing shortages, and the slowing economy.

Hogan noted, “We can shift to earnings and that will take up all the oxygen in the room. There’s a possibility this is where the market could make some traction. We haven’t really heard from anybody but big banks. There’s a chance that expectations are so low, and the narrative around guidance is that it’s going to have to come down. If it doesn’t, there’s a chance we’ll see a positive reaction to that.”

S&P 500 companies are expected to post a 5.6% increase in earnings overall based on actual reports and estimates, according to I/B/E/S data from Refinitiv. Refinitiv found that as of Friday, 80% of 35 S&P 500 companies that had reported earnings, had reported above their forecasts.

Hogan noted, companies usually beat expectations about 65% of the time by the end of earnings season. He went on, “It’s just a function of keeping your guidance. The same guidance is going to be good enough. We saw that with PepsiCo first out of the gate, leaving the forward guidance the same, and the stock was applauded for that. That could be the norm, rather than the exception.”

Krosby noted that investors will also be watching the housing data closely to gauge the effect of the rise in mortgage rates produced by the last interest rate hike. She continued, “It is a litany of real estate focus, which is important because we want to see how the housing market is holding up. It’s a focus for the Fed to slow down the housing market. We’ll see how that unfolds.”