Trade could be the biggest market catalyst in the week ahead
NEW YORK, NY - OCTOBER 25: Traders and financial professionals work on the floor of the New York Stock Exchange (NYSE) at the opening bell, October 25, 2018 in New York City.

The earnings deluge continues and inflation reports are due, but it will be the tone of trade talks in Beijing that could have the biggest impact on markets in the week ahead.

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin head to China, as the U.S. and Chinese still appear to be far apart on trade differences, ahead of a March 1 deadline on new tariffs.

Stocks were spooked Thursday and were weak Friday after White House top economic adivsor Larry Kudlow said differences between the two countries are "pretty sizeable" and the White House confirmed there are no plans yet for President Donald Trump and President Xi Jinping to meet.

"I think it's a very big deal, but I think this whole process is one to manage expectations, and the market, I think, is being set up for positive news. I think if some good news comes out next week, it will be a very positive event for the market. If not we could see some sideways volatility," said Don Townswick, head of equities at global investment management firm Conning.

Earnings will continue to rumble in from names including Cisco Systems, Coca-Cola and Pepsi, as another 60 S&P 500 companies report. Earnings for the fourth quarter have been up about 16 percent, but S&P 500 companies have warned that expectations were too high and now first quarter earnings are likely to show an actual decline.

"Obviously, last year's earnings were supercharged. This year, what looks like a negative year in terms of earnings growth is relative to last year," Townswick said. Many strategists point to the massive corporate tax cuts as being a big contributor to the pop in 2018 earnings growth, which reached 23 percent.

Besides earnings, there is some important data, particularly December's retail sales Friday and CPI consumer inflation Wednesday. Producer inflation is expected on Thursday. The inflation data will be especially important after the Fed indicated, following its January meeting, that it was willing to pause in its rate hiking and that inflation remain subdued.