The S&P 500 Index surged to a record high last week, extending a powerful bull run that began in March, when the index bottomed at 6,313. It has since climbed more than 23% from its year-to-date low, reflecting strong investor optimism. However, the rally faces several key tests this week, with a series of major economic events and corporate developments likely to drive market volatility.

S&P 500 Index to React to Some Minor Corporate Earnings

Most companies in the S&P 500 Index have already publish their financial results in the past few weeks. According to FactSet (NYSE:FDS), 88% of all companies in the index have already released their numbers. The blended earnings growth stands at 50.4%, its highest level since the second quarter of 2021. 

The most important companies that move the S&P 500 Index have already published their earnings. This includes the big banks and Magnificent 7 firms. The top companies to watch this week will be firms like Simon Property Group, Fergusson Enterprises, Rocket Lab, ASR SpaceMobile, Lumentum, and Cardinal Health. 

US Consumer Inflation Data

S&P 500 and other top US indices like the Dow Jones and Nasdaq 100 indices will also react to the upcoming US consumer inflation report that comes out on Wednesday. Polymarket data shows that the core CPI remained unchanged at 2.5% in July. The headline Consumer Price Index (CPI) is also expected to come in at 3.4% from the previous 3.5%.

These numbers will come a few days after the US released the weak nonfarm payrolls data. The economy lost 23,000 jobs in July, the worst performance in months. These numbers were good for the stock market because they reduced the odds that the Federal Reserve will hike rates this year. A lower-than-expected inflation report will be bullish for the S&P 500 Index.

US and Iran Tensions are Rising

Meanwhile, there are signs that the US and Iran tensions are rising. While Iran has reached a deal to reopen the Strait of Hormuz with Oman, the former has made a list of demands. Iran demands that the US ends the blockade, withdraws its millitary from nearby areas, pay war reparations, and release frozen assets. Iran believes that it is in the drivers seat after the recent reports of US weapons shortage.

A resumption of fighting between the US and Iran will lead to higher crude oil prices, affecting the stock market. On the other hand, signs of a deal will be bullish for the stock market as it leads to lower inflation. 

Separately, the volatility in the AI market will move the stock market. This includes price actions of popular companies like AMD, SanDisk, and Western Digital.

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