stocks head into the week ahead with a tailwind as investors focus on a hefty fiscal stimulus package and the solid earnings season against a backdrop of rising interest rates there are several dozen sp 500 companies reporting earnings including cocacola pepsico cisco and the walt disney co on the data front there are just a few reports in the coming week but the consumer price index inflation report is the important one to watch when it is released wednesday federal reserve chairman jerome powell speaks midweek at a webinar hosted by the economic club of new york stocks surged in the past week with the sp 500 jumping 465 to a new record high in its best week since november the sp 500 closed friday at 3886 the hyperactivity around shortsqueeze names like gamestop receded in the past week market chatter turned to rising interest rates the steepening yield curve and market expectations for inflation rates are actually going up as really an expression of the potential that economic activity is likely to start accelerating and well likely see some inflation said art hogan chief market strategist at national securities hogan said investors will stay most focused on the 19 trillion stimulus package which democrats are pushing forward if it is signed into law at its current size the total federal spending due to the pandemic would be 53 trillion according to cowen an investment bank i think the path of least resistance has resumed to a higher level i think we had a mini correction a week ago and i think it happened pretty quickly said hogan of national securities i think we continue to grind higher and the only bumps in the road that i can see are a delay in fiscal stimulus or some exogenous factor come in and changes the dynamics he added the market is also depending on continued improvement in new virus cases said hogan the prospect of more spending and an improving economy drove treasury yields higher in the past week the benchmark 10year treasury yield was at 116 late friday after edging to 118 earlier in the day near its recent high of 119 the 10year is the most closely watched as it influences the rates on mortgages and other consumer and business loans yields rise as the price of bonds decline market pros have also been watching another bond market metric the yield curve it is the spread between the yield on a shortterm treasury like the 2year note and a longer duration treasury like the 10year in that case the spread widened to reach 106 over the course of the week that is the highest level since the second quarter of 2017 a steeper curve which is what were seeing today is viewed as a sign of an improving economy strategists say the move higher in treasury yields so far is not detrimental to stocks but instead is a reflection of the economic bounce that could come from the stimulus package tom lee head of research at fundstrat global advisors said the steepening curve is good for the stock market creating a tailwind for his epicenter trade in stocks that will benefit from an improving postcovid economy his preferred sectors are the cyclicals including industrials consumer discretionary materials energy and financials lee said the selling by hedge funds after short squeezes in a number of stocks and the record decline in the vix the volatility index has led him to change his view on the stock market he previously expected a selloff in the first half of the year now lee sees a high probability that the first half 2021 correction is over the vix which is based on puts and calls in the sp 500 started the week over 33 and fell to 2087 when the market closed on friday a low vix signals lowered expectations for market volatility the sectors that did well in the past week were mostly the ones that will do better in a financial rebound or in a higher rate environment financials were 66 higher in the past week as big banks rose along with the yield curve higher longterm interest rates are a positive for bank profits the industrial group rose 49 and materials were up 39 energy lifted by a jump in oil prices gained 83 tech recovered some ground gaining 49 sectors that do not do particularly well with rising rates were up less including utilities up 23 and real estate investment trusts up 3 its really about having an economic boom allowing policy to support that boom said jim caron head of global macro strategies on the global fixed income team at morgan stanley investment management thats the key driver of why the curve is steepening some strategists say the curve is also steepening because of the us will be issuing a lot of debt to pay for the trillions in fiscal stimulus and that would cause interest rates to rise that has also triggered concerns about increasing inflation while economists do not expect inflation to spike they do see the potential for the first time in years for inflation to move meaningfully above 2 markets will also be monitoring the senate impeachment trial of president donald trump which begins feb 9 it will get a lot of attention do the markets care maybe not but everyone will be paying attention said michael schumacher head of rate strategy at wells fargo securities